Which of the Following Statements Is CORRECT

question 56

Multiple Choice

Which of the following statements is CORRECT?

• A) The NPV method was once the favorite of academics and business executives,but today most authorities regard the MIRR as being the best indicator of a project's profitability.
• B) If the cost of capital declines,this lowers a project's NPV.
• C) The NPV method is regarded by most academics as being the best indicator of a project's profitability,hence most academics recommend that firms use only this one method and disregard other methods.
• D) A project's NPV depends on the total amount of cash flows the project produces,but because the cash flows are discounted at the WACC,it does not matter if the cash flows occur early or late in the project's life.
• E) The NPV and IRR methods may give different recommendations regarding which of two mutually exclusive projects should be accepted,but they always give the same recommendation regarding the acceptability of a normal,independent project.

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Definitions:

Goods Purchased

The total value of all goods bought by a company for resale or for use in production.

Manufacturing Overhead

All the indirect costs associated with manufacturing a product, including indirect materials, labor, and expenses such as utilities and rent.

Product Costs

Product costs are the costs directly attributed to the creation of a product, including materials, labor, and overhead.

Direct Materials

Raw materials that can be directly identified with the production of specific goods or services.