When We Assume in Our Calculations for Capital Budgeting Decisions

question 28

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 be overstated.
• B)The net present value (NPV)of the project will be overstated.
• C)Inconsistent errors will exist in either NPV or IRR.
• D)The net present value (NPV)of the project will be understated.
• E)The use of DCF models in practice will not provide valid results.

---

Definitions:

Economic Constraints

Limitations on actions or choices due to financial resources, often impacting individuals' or organizations' abilities to pursue certain options.

Marginalization

The process through which individuals or groups are sidelined and denied access to important social, economic, or cultural opportunities.

Blustein's View

Refers to the perspective of psychologist David Blustein, who integrates aspects of the psychology of working, career development, and the role of work in people's lives.

Social Connection

The presence of relationships and interactions with others, providing a sense of belonging and support.