When We Assume in Our Calculations for Capital Budgeting Decisions

question 20

Multiple Choice

When we assume in our calculations for capital budgeting decisions that all cash flows occur at the end of individual years during the life of an investment project when, in fact, they flow more or less continuously during those years, which of the following statements is true?

• A) The internal rate of return (IRR) of the project will likely be overstated.
• B) The net present value (NPV) of the project will likely be overstated.
• C) Inconsistent errors will exist in either NPV or IRR.
• D) The stated (i.e., calculated) net present value (NPV) of the project will likely be understated.
• E) The use of DCF models will produce erratic results.

---

Definitions:

Social Meaning

The significance or interpretation of behaviors, symbols, or practices within a particular society or cultural context, influencing interactions and perceptions.

Nonverbally

Related to communication methods that do not involve spoken words, such as body language, facial expressions, and gestures.

Decoding Process

The decoding process entails the interpretation of a message or information received, transforming it from symbols or encoded forms into understandable content.

The Message

The core piece of information or idea that is conveyed by a communicator to an audience, especially in advertising or marketing contexts.