A problem with the net present value approach to project valuation is that:

Question

Quizplus · Accepted Answer

The net present value approach assumes that a project's cash flows are fixed and cannot be altered once the project has begun. This assumption ignores the possibility that the investing company may have the opportunity to intervene in the project and change its cash flows, which would affect its NPV. Therefore, the NPV approach is limited in its ability to account for the potential benefits of managerial flexibility.

A Problem with the Net Present Value Approach to Project