Which of the Following Statements Is FALSE

question 18

Multiple Choice

Which of the following statements is FALSE?

• A)The hurdle rate rule for projects with the option to delay uses a lower discount rate than the cost of capital to compute the NPV,but then applies the regular NPV rule: Invest whenever the NPV calculated using this lower discount rate is positive.
• B)While using a hurdle rate rule for deciding when to invest might be a cost-effective way to make investment decisions,it is important to remember that this rule does not provide an accurate measure of value.
• C)When the cash flows are constant and perpetual,and the reason to wait derives solely from interest rate uncertainty,the hurdle rate rule of thumb is always exact.However,when these conditions are not satisfied,the rule of thumb merely approximates the correct decision.
• D)When a firm faces the same uncertainty for most of its investment decisions,using a single profitability index criterion for all projects can provide a useful rule of thumb to account for cash flow uncertainty.

---

Definitions:

Progressive Income Tax

A tax system in which the tax rate increases as the taxable income increases, imposing higher rates on those with higher incomes.

Taxation

The process by which a government levy charges on citizens or corporate entities to finance government spending and activities.

Sales And Excise Taxes

Taxes placed on the sale or manufacture of goods and services, collected by the government.

Products

Goods or services that are created through a process and offered in the market to satisfy customer needs or desires.