Which of the Following Statements Is CORRECT

question 58

Multiple Choice

Which of the following statements is CORRECT?

• A) The NPV method assumes that cash flows will be reinvested at the WACC,while the IRR method assumes reinvestment at the IRR.
• B) The NPV method assumes that cash flows will be reinvested at the risk-free rate,while the IRR method assumes reinvestment at the IRR.
• C) The NPV method assumes that cash flows will be reinvested at the WACC,while the IRR method assumes reinvestment at the risk-free rate.
• D) The NPV method does not consider all relevant cash flows,particularly cash flows beyond the payback period.
• E) The IRR method does not consider all relevant cash flows,particularly cash flows beyond the payback period.

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Definitions:

Market Basket

A selected set of goods and services used to track changes in prices and measure inflation over time; represents the typical consumption of a household.

Nominal GDP

The aggregate price of every ultimate good and service generated within a nation over a certain period, valued in the current monetary rates without modifications for inflationary changes.

Hyperinflation

A very high rate of inflation.

Deflation

A decrease in the general price level of goods and services in an economy over a period, often leading to increased purchasing power of the currency.