Which of the Following Statements Is Trueregarding Capital Budgeting Methods

question 179

Multiple Choice

Which of the following statements is trueregarding capital budgeting methods?

• A)The Fisher rate can never exceed a company's cost of capital.
• B)The internal rate of return measure used for capital project evaluation has more conservative assumptions than the net present value method,especially for projects that generate a positive net present value.
• C)The net present value method of project evaluation will always provide the same ranking of projects as the profitability index method.
• D)The net present value method assumes that all cash inflows can be reinvested at the project's cost of capital.

---

Definitions:

Engel Curve

A graphical representation that shows the relationship between a consumer's income and their expenditure on a particular good, illustrating how consumption changes with income.

Utility Function

A representation of how consumer preferences over a set of goods and services are ordered, indicating the level of satisfaction derived from different bundles of goods.

Consumption

The action or process of using up goods and services, typically by households.

Utility Function

It is an economic model representing the preference level of consumers for different combinations of goods and services.