The NPV (or Tv') method has a number of advantages. First(l', these methods explicitly incorporate the

Evaluation  Assignment Help

Evaluation Assignment Help

assumption about how the cash inflows are reinvested once they are received and avoid any influence of the cost of capital on the cash inflow stream itself, Secondly it 'is mathematically easier. making simple the process of evaluating the investment worth of alternative capital  projects. Thirdly, this method would IX' easier to understand for business executives who are not trained in accountancy or economics  ha NPV for IRR, as the 'compounding technique', appeals more than 'discounting'. Foulard. it is better suited to cash budgeting requirements, The NPY computation in spite of being a cash flow approach docs not explicitly show all the cash inflows. It does not take into account cash inflows in, respect of interest earnings.The major practical problem of this method lies in projecting the future rates of interest at which the intermediate cash inflow's received will be reinvested.

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