Question: The net present value method is considered the most theoretically correct decision criteria because of all the following EXCEPT: 1- it allows the comparison of

The net present value method is considered the most theoretically correct decision criteria because of all the following EXCEPT:

1- it allows the comparison of benefits and costs of a project's estimated cash flows in a logical manner through the use of time value of money principles

2- It requires a detailed forecast of a project's future expected cash flows (e. benefits and costs) .

3- It assumes all intermittent cash flows can be reinvested at the firm's cost of capital, which is a more realistic reinvestment assumption than a project IRR

4-it provides the dollar amount by which positive (negative) NPV projects will increase (decrease) the value of the firm which is consistent with the goal of shareholder wealth maximization

Step by Step Solution

★★★★★

3.46 Rating (156 Votes )

There are 3 Steps involved in it

1 Expert Approved Answer

Step: 1 Unlock

The correct answer is option C It assumes all intermittent cash fl... View full answer

Question Has Been Solved by an Expert!

Get step-by-step solutions from verified subject matter experts

Step: 2 Unlock

Step: 3 Unlock

Students Have Also Explored These Related General Management Questions!

In general, students are expected to meet the following objectives: 1) To ascertain cost of capital for a new project by using cost of capital of existing firms operating in the same business. (2)...

Analyse questions 1 until 6 and write a report. Take note that this report is meant Mr Ramli who is not well verse in finance. Hence, you need to explain the intuition behind your calculations. For...

Managing Scope Changes Case Study Scope changes on a project can occur regardless of how well the project is planned or executed. Scope changes can be the result of something that was omitted during...

What is social value? How can the net present value method be modified to include the social value of proposed projects? MINI CASE Sandra McCloud a finance major in her last term of college is...

The management of Mid South Utilities Inc. is considering two capital investment projects. The estimated net cash flows from each project are as follows: The generating unit requires an investment of...

Julie Kowalis, an investment analyst, wants to know if her investments during the past four years have earned at least a 12% return. Four years ago, she had the following investments: a. She...

The Smith Pie Company is considering two mutually exclusive investments that would increase its capacity to make strawberry tarts. The firm uses a 12 percent cost of capital to evaluate potential...

Assume that six projects, A to F in the table that follows, have been submitted for inclusion in the coming year's budget for capital expenditures: REQUIRED 1. Compute the internal rates of return...

You have just graduated from the MBA program of a large university, and one of your favorite courses was "Today's Entrepreneurs." In fact, you enjoyed it so much you have decided you want to "be your...

53% of all violent felons in the prison system are repeat offenders. If 48 violent felons are randomly selected, find the probability that a. Exactly 24 of them are repeat offenders. b. At most 26 of...

Stacy Harding and Mike Ratliff are working together on an integrated curriculum for employees at the bank at which they work. As they develop objectives for their unit, they need to keep this in...

Many companies in the sharing economy have successfully taken their business to foreign markets as well. What challenges and opportunities do you see for these companies as they expand into foreign...

b. Within your 'Product Pricing Worksheet' locate the 'Projected Cash Flow' tab and record below the maximum monthly cash flow shortfall for any month in the year (known as the Working Capital...

Compliance with the enhanced financial disclosures associated with issuer reports includes all the following details except: A. Disclosure of transactions with principal shareholders. B. Verification...

Distinguish between personal and professional ethics decisions. Use an example of an employee of a new technology company to illustrate the differences in decision making between these two areas.

Muggs Co. incluye un cupn en cada bolsa de comida para perros que vende. A cambio de ocho cupones, los clientes reciben una correa. Las correas le cuestan a Muggs $3 cada una. Muggs estima que se...

Will the prediction interval always be wider than the estimation interval for the same value of the independent variable? Briefly explain.

For each of the following independent cases, compute cash flows from operating activities. Assume the list below includes all balance sheet accounts related to operatingactivities. Case A Case B Case...

What type of standard is best for motivating individuals to work hard?

What events or factors led to the creation and enactment of the Sarbanes-Oxley Act of 2002?

Your client purchases an annuity for $700,000 that provides beginning-of-month payments for 15 years. If the annuity earns 4.5% compounded monthly, what monthly payment will he receive? (Taken from...

Mr. Ng contributed $1000 to an RRSP at the beginning of each calendar quarter for the past 20 years. The plan earned 10% compounded quarterly for the first 10 years and 12% compounded quarterly for...

Your client wants to accumulate $1,000,000 over the next 25 years by investing the same amount at the beginning of each month. If she can expect a long-term rate of return of 8% compounded annually,...