Net present value:
A) Cannot be used when deciding between two mutually exclusive projects.
B) Is more useful to decision makers than the internal rate of return when comparing different sized projects.
C) Is easy to explain to non-financial managers and thus is the primary method of analysis used by the lowest levels of management.
D) Is computed the same as present value when using excel spreadsheets to analyze a project.
E) Is very similar in its methodology to the average accounting return.

Question

Quizplus · Accepted Answer

Net Present Value (NPV) is more useful than the Internal Rate of Return (IRR) when comparing projects of different sizes because it provides a dollar value that directly reflects the expected increase in wealth from the project, making it easier to compare the absolute value added by each project.