Do you think leaders in the Federal Government care about Net Present Value or Return on...

Do you think leaders in the Federal Government care about Net Present Value or Return on Investment?

Expert Solution

Federal government will be caring more about return on investment than net present value because the government will be liking to always maximize the rate of return in its shorter duration of governance rather than selecting Projects based upon the net present value for a longer period of time.

Federal government are generally working upon the philosophy of selection of such projects which will be yielding maximum benefit to the government in the short run,So they will be trying to select all the projects which are providing them with a high rate of return rather than selecting a project which will be providing them with higher net present value.

it can be said that net present value is calculated after comparing the cash inflows and outflows from a project and discounting it at the present whereas Rate of return on investment in calculated using the profits and it is not about the Cash flows.

Federal governments are generally selected for the shorter duration and they will be trying to attract the public by showing that they are actually generating a higher amount of profits and they are reporting surplus for the economy so they will be trying to select all the projects which will yielding them with a higher rate on return on investments in the short run rather than higher net present value in the long run so it can be said that is Federal governments are always trying to select the project on the basis of return on investment rather than that present value.

jeff jeffy answered 2 years ago

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