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What are the limitations of NPV when evaluating alternative investment proposals?
Wiki User
∙ 12y ago
NPV is not that flexible and only uses information available at the time of the decision. It does not account for changes to the projects after the initial decision is made. NPV factors in risk by using a single discount rate, but in reality choices in the future concerning the project will likely change its payoffs and risk. Try real option analysis instead if you want to get around this problem.
NPV only evaluates tangible and quantifiable projects. Some projects with negative NPVs are carried out anyway because they have some kind of strategic value, eg. it shows the firm in a good light, builds goodwill or allows access to as yet unknown earnings in the future.
Wiki User
∙ 12y ago
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Method of evaluating investment proposal?
The method of evaluating and investment proposal is dependent upon the type of proposal. Evaluating investment proposals include; obtaining up-to-date financial reports.
A method of evaluating capital investment proposals that ignore present value?
internal rate of return
Method of evaluating capital investment proposals that ignore present value?
internal rate of return
Various methods used for evaluating investment proposals?
It is important to use various methods for evaluating investment proposals. Some methods you can use is to research what the investment is currently worth, and how long it will take to mature. Take this information to help you determine if your money would be better used in other ways.
A method of evaluating capital investment proposals that ignore present value includes?
using payback period as the primary metric for decision making. The payback period measures the length of time it takes for the initial investment to be recovered from the project's cash flows. This method disregards the time value of money and does not account for the profitability or net present value of the investment.
The technical experts and nominated COR are usually involved in evaluating the technical merits of the submitted proposals and rating them?
Statement of Work
What has the author Bruce Rodda Williams written?
Bruce Rodda Williams has written: 'Investment proposals and decisions' 'International report on factors in investment behaviour' -- subject(s): Investments
What are some of the steps for evaluating proposals for capital investments?
Approve funds for research that may result in a product idea. Approve funds for market research that may result in a product proposal. Approve funds for product development that may result in a usable product. Approve funds for plant and/or equipment
What is the role of the opposition?
To provide an alternative government to the people at the next election and to keep the government honest and in check by debating and discussing their proposals.
What method of evaluating capital investment proposals uses the concept of present value to compute rate of return?
The method that uses the concept of present value to compute rate of return is called the Net Present Value (NPV) method. In this method, the cash inflows and outflows of a capital investment proposal are discounted to their present value using a discount rate. The NPV is then calculated by subtracting the initial investment from the present value of the cash flows. A positive NPV indicates a profitable investment, while a negative NPV suggests an unprofitable investment.
The technical experts and nominated COR are usually involved in evaluating the technical merits of the submitted proposals and rating them against of the final RFP?
Statement of work
Which one of the following selects the combination of investment proposals that will provide the greatest increase in the value of the firm within the budget ceiling constraint?
Capital rationing
