Which of the Following Statements Is FALSE

question 16

Multiple Choice

Which of the following statements is FALSE?

• A)The profitability index rule of thumb raises the bar on the NPV to take into account the option to wait.
• B)In practice,correctly modeling the sources of uncertainty and the appropriate dynamic decisions usually requires an extensive amount of time and financial expertise.
• C)Some firms use the following rule of thumb: Invest whenever the profitability index is below a specified level.
• D)Instead of raising the bar on the NPV,the hurdle rate rule raises the discount rate.

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Definitions:

Federal Income Tax

A tax levied by the federal government on the annual earnings of individuals, corporations, trusts, and other legal entities.

Medicare Taxes

Taxes withheld from income to fund Medicare, the United States' federal healthcare program for individuals aged 65 and older and some younger people with disabilities.

Marginal Tax Rates

The rate of tax applied to your last dollar of income, representing what percentage of any additional earned income will be taken as tax.

Average Tax Rates

The ratio of the total amount of taxes paid to the total income, providing a measure of the tax burden.