Which of the following is a disadvantage of the Net Present Value rule?
A)Can be misleading if inflows come before outflows
B)Not necessarily consistent with maximizing shareholder wealth
C)Ignores cash flows after the cutoff point
D)Relies on accurate estimate of the discount rate
E)Often an incorrect decision will result

Question

Quizplus · Accepted Answer

The Net Present Value (NPV) rule relies on an accurate estimate of the discount rate to discount future cash flows to their present value. An inaccurate discount rate can significantly affect the NPV calculation, leading to potentially incorrect investment decisions.

Which of the Following Is a Disadvantage of the Net