Which of the Following Statements Is Correct

question 9

Multiple Choice

Which of the following statements is correct?

• A) Because discounted payback takes account of the cost of capital, a project's discounted payback is normally shorter than its regular payback.
• B) The NPV and IRR methods use the same basic equation, but in the NPV method the discount rate is specified and the equation is solved for NPV, while in the IRR method the NPV is set equal to zero and the discount rate is found.
• C) If the cost of capital is less than the crossover rate for two mutually exclusive projects' NPV profiles, a NPV/IRR conflict will not occur.
• D) If you are choosing between two projects which have the same life, and if their NPV profiles cross, then the smaller project will probably be the one with the steeper NPV profile.
• E) If the cost of capital is relatively high, this will favor larger, longer-term projects over smaller, shorter-term alternatives because it is good to earn high rates on larger amounts over longer periods.

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Definitions:

Expected Frequency

In statistics, the frequency expected in a category of a contingency table under the assumption that the null hypothesis is true.

Chi-Square

A statistical test that measures the difference between observed and expected frequencies in categorical data.

Row Variable

In the context of a data table or matrix, it refers to the variable represented by the rows, often used in cross-tabulation to compare against another variable.

Column Variable

A variable represented by a column in a dataset, where each entry in the column represents a value of the variable.