The present value break-even point is superior to the accounting break-even point because:

Question

Quizplus · Accepted Answer

The present value break-even point takes into account the economic opportunity costs of the investment, while the accounting break-even point only covers the accounting costs of production. This makes the present value break-even point a superior measure for evaluating the profitability of a project. Option A is incorrect because while present value break-even may be more complex, that is not the reason why it is superior to the accounting break-even point. Option C is incorrect because sensitivity analysis is a different technique altogether. Option D and E are incorrect because both the accounting break-even and present value break-even cover fixed and variable costs of production, respectively.

The Present Value Break-Even Point Is Superior to the Accounting