Question

The drawback of the NPV method that is NOT remedied by the PI method is? NPV...

The drawback of the NPV method that is NOT remedied by the PI method is?

NPV is challenging to interpret for laypersons

NPV ignores the cost of capital

NPV and PB usually disagree as to the accept/reject decision

NPV is an absolute measure
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Answer #1

Answer to above is NPV is challenging to interpret for laypersons.

Therefore 1st option is correct.

NPV ignores the cost of capital. Incorrect. Discounting of cashflows is done using cost of capital.

NPV and PB usually disagree as to the accept/reject decision. Incorrect. NPV & PB usually agree as to accept / reject decision.

NPV is an absolute measure. Surely this is one of the drawbacks of NPV method. However it is remedied by the PI method which is relative measure.

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