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Accounting

27th Edition
WARREN + 5 others
ISBN: 9781337272094

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BuyFindarrow_forward

Accounting

27th Edition
WARREN + 5 others
ISBN: 9781337272094
Textbook Problem

What are the major disadvantages of the use of the net present value method of analyzing capital investment proposals?

To determine

Net present value method:

Net present value method is the method which is used to compare the initial cash outflow of investment with the present value of its cash inflows. In the net present value, the interest rate is determined by the business, based on the net income from the investment, and it is also called as the discounted cash flow method.

To indicate: The major disadvantages of the use of the net present value method of analyzing the capital investment proposals.

Explanation

The major disadvantages of the use of the net present value method of analyzing the capital investment proposals are as follows:

1. The calculations for net present value method are more complex compar...

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