On a purely theoretical basis, the NPV is the better approach to capital budgeting due to all the following reasons EXCEPT
A) that it measures the benefits relative to the amount invested.
B) for the reasonableness of the reinvestment rate assumption.
C) that there may be multiple solutions for an IRR computation.
D) that it maximizes shareholder wealth.

Question

Quizplus · Accepted Answer

NPV does not measure benefits relative to the amount invested; this is a characteristic of the profitability index.

On a Purely Theoretical Basis, the NPV Is the Better