Given a Particular Set of Project Cash Flows, Which One

question 58

Multiple Choice

Given a particular set of project cash flows, which one of the following statements must be correct?

• A) There can be only one NPV for the project, even with multiple discount rates.
• B) There can be only one IRR for the project.
• C) There can be more than one IRR for the project.
• D)There can be only one profitability index for the project, even with multiple discount rates.

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Definitions:

Operating Income

The profit realized from a business's core operations, excluding deductions of interest and tax, representing the efficiency of the company's core business.

Fixed Costs

Expenses that remain constant regardless of the amount of goods or services produced or sold, including lease payments, wage payments, and insurance premiums.

Variable Costs

Expenses that vary directly with the level of production or sales volume, such as raw materials and direct labor costs.

Contribution Margin Ratio

The percentage of each sales dollar remaining after deducting variable costs, indicating how much contributes to covering fixed costs and generating profit.