Which of the Following Statements Is CORRECT

question 33

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.
• 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:

Algorithmic Method

The algorithmic method involves solving problems through a clear, step-by-step procedure or set of rules that guarantees a correct solution.

Heuristic Method

A problem-solving strategy that employs practical methods or shortcuts to generate solutions that are "good enough" for solving complex problems.

Mnemonic Device

A tool that helps remember information through patterns, such as sequences of letters, ideas, or associations.

Phonemes

The smallest unit of sound in a language that can distinguish one word from another.