Which of the following does not characterize NPV?
A)NPV does not explicitly incorporate risk into the analysis.
B)NPV incorporates all relevant cash ﬂow information.
C)NPV uses all of the project's cash ﬂows.
D)NPV discounts all future cash ﬂows.
E)Using NPV will lead to decisions that maximize shareholder wealth.

Question

Quizplus · Accepted Answer

NPV does incorporate risk into the analysis through the discount rate applied to future cash flows. A higher discount rate accounts for higher risk and results in a lower NPV. Therefore, option A is incorrect. The other options correctly characterize NPV.

Which of the Following Does Not Characterize NPV