What is the main limitation of the NPV method of economic analysis?

The main limitation of the NPV (Net Present Value) method is that it is geared more towards larger projects. This is because the NPV method tends to work best when there are significant cash flows to analyze over time, allowing for a clear evaluation of the project's return over a substantial period. Larger projects usually have more extensive data, larger investments, and longer time frames, which makes the NPV method more applicable and useful in assessing their potential economic viability.

For smaller projects, the relative complexity and effort required to gather data and project future cash flows may not justify the use of the NPV method, leading to situations where simpler analysis tools might be more appropriate. Hence, the focus on larger projects highlights a practical limitation of the NPV approach in its utility across all potential investments, particularly those that are smaller or less complex.