Which of the Following Statements Is Correct

question 29

Multiple Choice

Which of the following statements is correct?

• A)The internal rate of return (IRR) does not allow you to determine whether mutually exclusive projects are acceptable.
• B)The net present value (NPV) is the only capital budgeting technique that allows you to determine which independent projects are acceptable.
• C)The net present value (NPV) technique provides an indication of the dollar benefit (on a present value basis) to the firm's shareholders of purchasing a capital budgeting project.
• D)A project's internal rate of return (IRR) depends on the firm's required rate of return, which means that a project's IRR is different for each firm that has a different required rate of return.
• E)The net present value (NPV) technique contains information about a project's safety margin, which is not inherent in the internal rate of return (IRR).

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Definitions:

Rental Activity

Engaging in the act of renting out property or equipment as a business operation to generate income.

AMT Adjustments

Modifications made to calculate the Alternative Minimum Tax (AMT), aiming to ensure that high-income earners pay a minimum amount of income tax.

Tax Preferences

Provisions in the tax code that allow for certain incomes to be taxed at rates lower than the ordinary income tax rate or not taxed at all.

AMTI

Alternative Minimum Taxable Income, a calculation used to determine a taxpayer's liability for Alternative Minimum Tax, ensuring that those who benefit from certain deductions pay a minimum amount of tax.