Why is the net present value (NPV) method of investment appraisal considered to be theoretically
superior to other methods that are found in practice?
The payback method has been criticised for not taking the time value of money into account.
Could this limitation be overcome? If so, would this method then be preferable to the NPV method?
Research indicates that the IRR method is extremely popular even though it has shortcomings
when compared to the NPV method. Why might managers prefer to use IRR rather than NPV
when carrying out discounted cash flow evaluations?
Why are cash flows rather than profit flows used in the IRR, NPV and PP methods of investment
appraisal?
