There is an INCONSISTENCY between using the net present value method as best for capital budgeting decisions and then using a different method to evaluate performance.

Question

Quizplus · Accepted Answer

If a company uses the net present value method to make capital budgeting decisions, it is evaluating potential investments based on their ability to generate future cash flows and considering the time value of money. Therefore, when it comes to evaluating the performance of those investments, it would be consistent to use the same method, as it provides a clear measure of whether the investments are creating value for the company. Using a different method could lead to inconsistency in the evaluation of performance, as different methods may focus on different aspects of the investment's performance or give different weight to certain factors.

There Is an INCONSISTENCY Between Using the Net Present Value