Asked by Chasity Fields on Apr 24, 2024
Verified
The assumption that current cash flows will be maintained if the project does not go ahead, contributes to investment in advanced technologies being rejected when using the net present value investment decision model.
Net Present Value
A performance indicator for assessing an investment's profit, derived by taking away the current value of cash disbursements from the current value of cash incomes during a specific period.
- Identify the pivotal elements affecting decisions on capital spending, such as market dynamics, competitive responses, and economic patterns.
Verified Answer
ZK
Zybrea KnightMay 02, 2024
Final Answer :
True
Explanation :
This assumption overlooks the potential for technological obsolescence and increased competition, which could diminish future cash flows if the investment in advanced technologies is not made, leading to a possible underestimation of the project's benefits when using the net present value model.
Learning Objectives
- Identify the pivotal elements affecting decisions on capital spending, such as market dynamics, competitive responses, and economic patterns.
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