Which of the following factors are subject to uncertainty in an NPV analysis? I $\quad $Project life
II $\quad $Appropriate discount rate
III $\quad $Terminal value
A) I, II, and III
B) I and II only
C) II and III only
D) I and III only

Question

Quizplus · Accepted Answer

All three factors, project life, appropriate discount rate, and terminal value, are subject to uncertainty in an NPV (Net Present Value) analysis. Project life can vary due to unforeseen circumstances, the appropriate discount rate can fluctuate with market conditions, and the terminal value is often an estimate of future cash flows, which can be uncertain.

Which of the Following Factors Are Subject to Uncertainty in an NPV