Demerits of net present value method, Financial Management

Assignment Help:

Q. Demerits of net present value method?

(i) Difficult to Understand as well as Implement:- This method is tricky to understand as well as implement in comparison to the payback and the ARR method.

(ii) Complexity in fixing the required rate of return: - Required rate or else discount rate are the most important in calculating the NPV for the reason that different discount rates will give different present values.

(iii)In case of two projects with irregular initial investment this method mayn't give satisfactory result.

(iv) In case of two projects with dissimilar lives this method may not give satisfactory result.


Related Discussions:- Demerits of net present value method

Approaches of the strategic human resource management, Approaches of the St...

Approaches of the Strategic human resource management (SHRM): 1. Attempts to the human linkage of some kind activities with competency based performance measures. 2. Attemp

What does weighted average cost of capital, What does the "weight" refer to...

What does the "weight" refer to in the weighted average cost of capital? The weight pass on to in weighted average cost of capital refers to the portion of the total capital in

Explain some examples under fasb 52, Explain some Examples under FASB 52 th...

Explain some Examples under FASB 52 that a foreign entity's functional currency would be similar as the parent firm's currency. Answer:  Three instances under FASB 52, in which

Cash vs. accrual accounting, Cash vs. Accrual Accounting: While it is b...

Cash vs. Accrual Accounting: While it is beyond the scope of this module to assess accounting systems against all types of accounting styles, it is important that managers unde

Highest earnings-per-share, McGovern Company is comparing two disimilar cap...

McGovern Company is comparing two disimilar capital structures - an all-equity plan (Plan I) and a levered plan (Plan II).  Under Plan I, the Company would have 700,000 shares of s

Bonds, Explain what a bond is and discuss its nature as a "fi xed income" s...

Explain what a bond is and discuss its nature as a "fi xed income" security.Discuss important terms in relation to bonds as the "price", "maturity", "current yield", "yield to matu

Define can a corporation have too much working capital, Can a corporation h...

Can a corporation have too much working capital?  Explain. A firm can have very much working capital if it is losing the opportunity to invest in high returning fixed assets and

Define the price and earning ratio valuation method, Define the P/E valuati...

Define the P/E valuation method. Under what circumstances should a stock be valued using this method? The P/E ratio points out how much investor are willing to pay for each dol

For capital budgeting decision which cost is relevant, For capital budgetin...

For capital budgeting decision which cost is relevant For capital budgeting decision, composite cost of capital is comparatively more relevant albeit the firm may finance one p

Display the position explicitly, Q. Display the position explicitly Ex...

Q. Display the position explicitly Example: I borrow 7800000 HKD at time t = t 0 at an interest rate r t0 . After one year I pay back 7800000(1 + rt o ). At

Write Your Message!

Captcha
Free Assignment Quote

Assured A++ Grade

Get guaranteed satisfaction & time on delivery in every assignment order you paid with us! We ensure premium quality solution document along with free turntin report!

All rights reserved! Copyrights ©2019-2020 ExpertsMind IT Educational Pvt Ltd