2006-11-06 00:26:06 · 3 answers · asked by lawrence g 1 in Business & Finance ➔ Investing
The primary disadvantage of benefit-cost ratio is that it ignores the absolute size of the payoff. Say, you have two mutuallly exclusive projects; one requires $10 million in investment and delivers $2 in net present value, the other requires $1 million in investment and delivers $1 million in net present value; capital is not rationed. The benefit-cost ratio would have you choose the second, while profit-maximization approach would have you go with the first...
2006-11-06 02:36:13 · answer #1 · answered by NC 7 · 1⤊ 0⤋
Advantages Of Benefit Cost Ratio
2017-01-15 03:09:31 · answer #2 · answered by kadlec 4 · 0⤊ 0⤋
Benifit/Cost ratio is the ratio of the Present vallue of all your cash inflows to your investment. If it is greater than 1 then you have a proper investment decision. There is no disadvantages to it.
2006-11-06 02:17:59 · answer #3 · answered by Mathew C 5 · 0⤊ 0⤋