Abstract
Abstract The suggestion that use of the net present value (NPV) rule in major investment decisions induces illusions of certainty and encourages over‐confidence on the part of users is contested. In the event that poor decisions are made when the NPV rule has been used, it is argued here that the causes will be behavioural and competence‐centred rather than technique‐based. The argument is advanced that the NPV rule is an important rational evaluation technique that provides astute and numerate managers and directors with important economic information and satisfies the demands of the investing community for a wealth creation‐based criterion for strategic decisions. Copyright © 2006 John Wiley & Sons, Ltd.
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