Generally, the most difficult part of utilizing the net present value concept is:

A) Determining the initial cash outflow required to start a project.
B) Computing the net present value once the discount rate and cash flows are determined.
C) Determining whether the discount rate used is higher or lower than the internal rate of return.
D) Estimating the future cash flows given the initial investment in the project.
E) Making the accept/reject decision once the net present value is computed.

Question

Kunal Chand · Accepted Answer

Final Answer : D, Explanation :  Estimating future cash flows is generally considered the most challenging aspect of utilizing the net present value (NPV) concept because it involves forecasting future events and conditions, which is inherently uncertain and requires assumptions about many variables such as sales volumes, prices, costs, and market conditions.

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