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

Explain about the audit risk, Audit risk Obtain understanding of ac...

Audit risk Obtain understanding of accounting and internal control systems. Sufficient to plan audit and develop effective audit approach. Professional judgement to

Bankruptcy and bondholder rights, The holder of a corporate debt inst...

The holder of a corporate debt instrument is preferred to equity shareholders in the bankruptcy proceedings. However, secured/senior creditors are preferred to no

Working capital, discuss the applicability of an operating cycle considerin...

discuss the applicability of an operating cycle considering broilers?

Walters model, A Ltd sells goods at Rs.10.P.U. Its variable cost Rs.7.P.U a...

A Ltd sells goods at Rs.10.P.U. Its variable cost Rs.7.P.U and fixed cost amount to Rs.1,70,000 it finances all its assets by equity funds. It pays 40% tax on its income. Z Ltd is

Which method should we use to valuate young companies, Which method should ...

Which method should we use to valuate young companies with high growth but uncertain futures? Two examples were Boston Chicken and Telepizza when they began. The great majo

CAPM, Techiniques of capm Effects of capm

Techiniques of capm Effects of capm

Securities, Calculate the expected rate of return and risk of return

Calculate the expected rate of return and risk of return

NET INCOME APPROACH.., You are required to compute the value of both the fi...

You are required to compute the value of both the firms using Net Income approach.

Trouble in determination of cost of capital, Q. Trouble in Determination of...

Q. Trouble in Determination of Cost of Capital? Trouble in Determination of Cost of Capital:- 1. Historic Cost as well as Future Cost: - One main problem in the determinatio

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