In: Finance
Explain the reasons why the Net Present Value method is the most superior method of project evaluation.
NPV is superior method than all other methods in project evaluation due to the fact that NPV can handle projects with different sizes and projects with varying period of time.
NPV method employs more realistic reinvestment rate which is close to cost of capital.
NPV uses time value of money unlike payback period method.
NPV provides how much profit will generate by the project in real terms or exact numbers.
Hence NPV is superior than all other methods in capital project evaluation.