Why does a strict NPV calculation typically understate the value of a company or project?
How to Assess NPV Estimate
The net present value (NPV) is the most used capital budgeting tool in evaluating investment projects. However, the method provides an estimate under uncertain outcomes in the future and therefore, ignores the possible upside events.
Answer and Explanation:
When using the NPV method, managers often confront a YES or NO answer. If the NPV is positive, invest and if not, not invest. However, the NPV method...
See full answer below.
Become a member and unlock all Study Answers
Try it risk-free for 30 daysTry it risk-free
Ask a question
Our experts can answer your tough homework and study questions.Ask a question Ask a question
Learn more about this topic:
from Financial Accounting: Help and ReviewChapter 4 / Lesson 1