Response to Comments Essay Example | Topics and Well Written Essays - 250 words

Response to Comments - Essay Example All accountants and financial analysts realize that money losses value over time due to inflation. Back in the 1960’s the money these people had was worth twice as much as today’s money because our elders had greater buying power due to the fact money had not depreciated like it has in today’ economy. DQ2 When a company is using the NVP value method a firm should only accept a project if the project has a NPV above cero. In your response I believe you mentioned that a company could do badly irrelevant of the NPV being above cero. Well this could happen because the NPV analysis is limited to the project that the analysis is evaluating. If a firm has financial troubles that existed irrelevant of the results associated with the NPV of a project then a firm could go down under. The NPV analysis is not a tool that can be used to evaluate the overall standing of a firm. The scope of an NPV analysis is limited to the scope of the project that the financial tool is used for (Besley & Brigham, 2000). The NPV tool can help managers determine the viability of a capital project. References Besley, S., Brigham, E. (2000). Essential of Managerial Finance (12th ed.). Fort Forth: The Dryden Press.