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If investment funds are limited, the net present value of one project should not be compared...

If investment funds are limited, the net present value of one project should not be compared directly to the net present value of another project unless the initial investments in these projects are equal.

True or False and why?

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Answer #1

Answer: True

Net present value is the Present Value of Cash inflows less Present value of Investment to be Made on the project.

NPV Method clearly specifies the Accept or reject the project on the bases of NPV Value.

But NPV is never used to compare the one project with other as Cash inflows depend on the investment Made.

If Investments amount is equal then projects can Compare directly with the Net present value

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