In Kaplan's CFA Level 1 online course, it has been claimed that after-tax cash flow-based ratios (NPV) are better than profit-based ratios (ROE, EPS, etc...) in terms of evaluating capital allocation projects. I am wondering why is this the case? Also, is it completely unacceptable to use profit-based ratios for evaluating capital allocation in the industry? Thank you so much.
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