What is one advantage of using Net Present Value (NPV)?

Net Present Value (NPV) is a financial metric that calculates the expected profitability of an investment by taking into account the time value of money. This concept acknowledges that a dollar received today is worth more than a dollar received in the future due to its potential earning capacity. By discounting future cash flows back to their present value, NPV provides a more accurate representation of an investment's value over time.

When considering NPV, it allows for the comprehensive assessment of an investment's profitability by correlating future cash inflows and outflows with their present value. This method helps in making informed decisions about whether to pursue a particular project or investment, as it reflects the true economic benefit in today's terms.

In contrast, other options like ignoring risk factors or failing to incorporate the time value of money do not provide an accurate measure of profitability and may lead to poor investment decisions. The notion that NPV is suitable for all project comparisons regardless of size is misleading, as different projects may have varying scales and contexts that affect their risk and return profiles. Hence, the ability of NPV to accurately calculate cash flows while considering the time value of money is a crucial advantage.