Asked by levana znaty on Jun 19, 2024
Verified
Given that the net present value (NPV) is generally considered to be the best method of analysis, why should you still use the other methods?
A) The other methods help validate whether or not the results from the net present value analysis are reliable.
B) You need to use the other methods since conventional practice dictates that you only accept projects after you have generated three accept indicators.
C) You need to use other methods because the net present value method is unreliable when a project has unconventional cash flows.
D) The average accounting return must always indicate acceptance since this is the best method from a financial perspective.
E) The discounted payback method must always be computed to determine if a project returns a positive cash flow since NPV does not measure this aspect of a project.
Net Present Value
The difference between the present value of cash inflows and the present value of cash outflows over a period of time, used in capital budgeting to assess profitability.
Analytical Methods
Techniques and procedures used to break down complex material or data into simpler parts to understand it better or reach conclusions.
Cash Flows
The full measure of financial transactions entering and leaving a business, essentially shaping its liquidity factor.
- Understand the significance of employing various assessment techniques for a thorough examination of projects.
Verified Answer
JB
Joshua BrightJun 19, 2024
Final Answer :
A
Explanation :
The other methods of analysis, such as internal rate of return (IRR), payback period, and profitability index, can provide additional insights and perspectives on the financial viability of a project. They can serve as a cross-check against the NPV method, helping to ensure that the decision made is robust across different evaluation criteria.
Learning Objectives
- Understand the significance of employing various assessment techniques for a thorough examination of projects.