Which of the Following Statements Is FALSE

question 64

Multiple Choice

Which of the following statements is FALSE?

• A)When using the incremental IRR rule,you must keep track of which project is the incremental project and ensure that the incremental cash flows are initially positive and then become negative.
• B)Picking one project over another simply because it has a larger IRR can lead to mistakes.
• C)Problems arise using the IRR method when the mutually exclusive investments have differences in scale.
• D)When the risks of two projects are different,only the NPV rule will give a reliable answer.

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Definitions:

Revenue Activity

Activities undertaken by a business that result in the earning of income, typically from the sale of goods or provision of services.

Cash Investments

Financial assets such as stocks, bonds, or real estate purchased with the expectation of generating a return on investment.

Statement of Cash Flows

A financial statement detailing the impact of alterations in balance sheet accounts and income on cash and cash equivalents, segmented into operating, investing, and financing activities.

Stockholders

Individuals or entities that own one or more shares of stock in a corporation, making them owners of a portion of the company.