Which of the Following Statements Is False

question 85

Multiple Choice

Which of the following statements is false?

• A) The NPV will be positive if the IRR is less than the required rate of return.
• B) If the multiple IRR problem does not exist, any independent project acceptable by the NPV method will also be acceptable by the IRR method.
• C) When IRR = k (the required rate of return), NPV = 0.
• D) The IRR can be positive even if the NPV is negative.
• E) The NPV method is not affected by the multiple IRR problem.

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Definitions:

Producer Surplus

The imbalance between the desired compensation by producers for a good or service and the real income they secure.

Binding Price Ceiling

A government-imposed limit on the price of a commodity or service that is set below the market equilibrium price, causing a shortage.

Binding Price Floor

A government-imposed price control set above the equilibrium price, causing a surplus by forcing the price to be higher than what the market would naturally set.

Deadweight Loss

A loss of economic efficiency that can occur when the equilibrium for a good or service is not achieved or is not achievable, typically resulting from taxes or price controls.