When the present value analysis of a proposed investment results in an indication that the proposal has a rate of return greater than the cost of capital, the investment might not be made because:
A) the quantitative analysis indicates that it should not be made.
B) management's assessment of qualitative factors overrides the quantitative analysis.
C) the timing of the cash flows of the investment will not be as assumed in the present value calculation.
D)post-audits of prior investments have revealed that cash flow estimates were consistently less than actual cash flows realized.

Question

Quizplus · Accepted Answer

Qualitative factors such as strategic fit, organizational capabilities, and other non-financial considerations may still influence the decision to proceed with an investment even if the quantitative analysis indicates a favorable rate of return.

When the Present Value Analysis of a Proposed Investment Results