Which of the Following Statements Is CORRECT

question 53

Multiple Choice

Which of the following statements is CORRECT?

• A) If the cost of capital declines, this lowers a project's NPV.
• B) 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.
• C) A project's NPV depends on the total amount of cash flows the project produces, but because the cash flows are discounted at the cost of capital, it does not matter if the cash flows occur early or late in the project's life.
• D) 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.
• E) 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.

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Definitions:

Vertical Integration

The expansion of a business by acquiring or establishing control over different stages of its production or distribution processes.

Acquires Suppliers

The process where a company takes ownership of its suppliers to control the supply chain or reduce production costs.

Acquires Distributors

The process by which a company purchases or assumes control over distribution firms to streamline its supply chain and improve market access.

Forward Integration

A business strategy where a company controls the distribution or the supply chain for its products.