Which of the following factors are subject to uncertainty in an NPV analysis?
I. Project life
II. Appropriate discount rate
III. Terminal value
A) I and II only
B) II and III only
C) I and III only
D) I, II, and III

Question

Quizplus · Accepted Answer

All three factors are subject to uncertainty in an NPV analysis. The project life may be impacted by unexpected events or changes in market conditions, the appropriate discount rate may be uncertain due to changes in interest rates or market conditions, and the terminal value relies heavily on long-term projections that may be difficult to predict with certainty. Therefore, all three factors should be carefully considered and analyzed in an NPV analysis.

Which of the Following Factors Are Subject to Uncertainty in an NPV