Question

The NPV method: Select one: a. is not ideal because sometimes there will be more than...

The NPV method:

Select one:

a. is not ideal because sometimes there will be more than one NPV for a project

b. produces a percentage result that is easy to describe

c. may be used to select among projects of different sizes

d. has an inadequate reinvestment assumption

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Answer #1

Option C is correct

The NPV method may be used to select among projects of different sizes. The size of the project is not relevant when comparing two projects. The project with highest NPV is selected.

Option A is incorrect because there can never be more than one NPV for a project

Option B is incorrect because it produces results in dollar amount, not a percentage

Option D is incorrect because the reinvestment assumption is adequate in NPV method.

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