Which of the Following Statements Is True About Capital Budgeting

question 40

Multiple Choice

Which of the following statements is true about capital budgeting analysis?

• A) Higher discount rates are used for computing the net present values (NPVs) of riskier cash flows.
• B) A project with only cash outflows and no cash inflows would have two internal rates of return (IRRs).
• C) The payback period method should be used for capital budgeting decisions if there is a conflict in the project rankings as per the NPV method and the IRR method.
• D) The net present value (NPV) method should be used to evaluate independent projects, and the internal rate of return (IRR) method for mutually exclusive projects.
• E) The payback period method should be used for capital budgeting decisions if the project has multiple cash outflows.

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