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Question 4.A.19: Earlier in the chapter, we discussed the limitations of the ...

Earlier in the chapter, we discussed the limitations of the PP method. Can you explain why it is still a popular method of investment appraisal among managers?

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There seems to be several possible reasons:

■ PP is easy to understand and use.
■ It can avoid the problems of forecasting far into the future.
■ It gives emphasis to the early cash flows when there is greater certainty concerning the accuracy of their predicted value.
■ It emphasises the importance of liquidity.

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