Which of the Following Statements Is FALSE

question 10

Multiple Choice

Which of the following statements is FALSE?

• A)The break-even level of an input is the level for which the investment has an IRR of zero.
• B)The most difficult part of capital budgeting is deciding how to estimate the cash flows and the cost of capital.
• C)When evaluating a capital budgeting project,financial managers should make the decision that maximizes NPV.
• D)Sensitivity analysis reveals which aspects of the project are most critical when we are actually managing the project.

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Definitions:

Interest Tax Shield

The tax savings achieved by deducting payable interest on debt from taxable income, thereby reducing the overall tax expense.

Deductibility

Deductibility refers to the eligibility of an expense to be subtracted from gross income to reduce taxable income, under tax regulations.

Tax Savings

Reductions in tax payments achievable through various deductions, credits, or allowances.

Equity Risk

The risk of loss associated with fluctuations in the equity market, impacting the value of stocks and shareholders' investments.