Which of the Following Statements Is CORRECT

question 99

Multiple Choice

Which of the following statements is CORRECT?

• A) One defect of the IRR method versus the NPV is that the IRR does not take account of cash flows over a project's full life.
• B) One defect of the IRR method versus the NPV is that the IRR does not take account of the time value of money.
• C) One defect of the IRR method versus the NPV is that the IRR does not take account of the cost of capital.
• D) One defect of the IRR method versus the NPV is that the IRR values a dollar received today the same as a dollar that will not be received until sometime in the future.
• E) One defect of the IRR method versus the NPV is that the IRR does not take proper account of differences in the sizes of projects.

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Definitions:

Economies of Scale

The cost advantages that enterprises obtain due to their scale of operation, with cost per unit of output generally decreasing with increasing scale.

Diseconomies of Scale

The situation where a company or business grows so large that the costs per unit increase, leading to inefficiency.

Constant Returns to Scale

A condition in production where increasing the inputs results in a proportional increase in output.

Diseconomies of Scale

A condition in which a firm experiences increased costs per unit when it scales up its production due to inefficiencies.