Given that the net present value (NPV) is generally considered to be the best method of analysis, why should you still use the other methods?
A)The other methods help validate whether or not the results from the net present value
Analysis are reliable.
B)You need to use the other methods since conventional practice dictates that you only
Accept projects after you have generated three accept indicators.
C)You need to use other methods because the net present value method is unreliable when
A project has unconventional cash ﬂows.
D)The average accounting return must always indicate acceptance since this is the best
Method from a ﬁnancial perspective.
E)The discounted payback method must always be computed to determine if a project
Returns a positive cash ﬂow since NPV does not measure this aspect of a project.

Question

Quizplus · Accepted Answer

The other methods such as Internal Rate of Return (IRR) and Payback Period can provide additional insights into the project's profitability and cash flow characteristics. They can also help validate the results obtained from the net present value analysis. For example, if the IRR and payback period methods also indicate that the project is profitable, it increases confidence in the net present value analysis. Additionally, certain unique project characteristics such as initial investment outflows that are followed by large inflows may make the net present value method unreliable, and in such cases, other methods can provide a more accurate picture of the project's profitability.

Given That the Net Present Value (NPV) Is Generally Considered