Question: 2 . Select the statement that inaccurately describes the pros and cons of the following financial evaluation metrics : A . Net Present Value (
Select the statement that inaccurately describes the pros and cons of the following financial evaluation metrics : A Net Present Value NPV Pros: Provides a clear dollar amount that reflects the added value from the project considering the time value of money Cons : Requires an accurate discount rate to be effective and it can be difficult to estimate future cash flows accurately which affects the precision of the calculation B Internal Rate of Return IRR Pros: Indicates the expected rate of return of a project making it easy to compare with required rates of return or other investment opportunities. Can result in multiple values for projects with alternating cash flows which may lead to best decision making alternative C Payback Period Pros: Simple and easy to calculate, providing a quick assessment of how soon an investment can be recovered. Cons: Considers the time value of money and fails to measure profitability beyond the payback point. D Profitability Index Pros: Useful for comparing projects of different scales by indicating the relative value created per dollar invested. Cons: Like NPV depends heavily on the accuracy of the discount rate and cash flow projections, and it does not indicate how quickly the investment will be recouped.
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