Which errors will likely have the largest effect on the net present value of changes in assumptions and estimates?

Question

Quizplus · Accepted Answer

Errors in predicting the amounts of future cash flows have the largest effect on the net present value of changes in assumptions and estimates as they directly impact the cash inflows and outflows used in calculating the present value. Errors in predicting the timing of cash flows and the discount rate may also affect the net present value, but their impact is typically less significant compared to errors in predicting future cash flows amounts. Errors in sensitivity analysis represent a methodology for assessing the impact of changes in assumptions and estimates, rather than an error in itself.

Which Errors Will Likely Have the Largest Effect on the Net