Which of the Following Statements Is Correct

question 12

Multiple Choice

Which of the following statements is correct?

• A)In general, the NPVs of riskier cash flows should be found using relatively high discount rates.However, if a cash flow is negative, it should be evaluated using a low discount rate.
• B)If a project has only costs (no revenues) as would certain environmental projects, then the project is likely to have two regular IRRs.
• C)If the NPV and IRR methods give conflicting rankings for two mutually exclusive projects, the payback period should be used to choose the project that should be purchased.
• D)It is better to use the NPV method to evaluate independent projects, but for mutually exclusive projects, especially if projects vary greatly in size, the IRR method is better.
• E)None of the above is a correct statement.

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Definitions:

Business Relationship

A connection between individuals or entities involved in business activities, focusing on commercial transactions, partnerships, or agreements.

Illegal Interference

Unauthorized or unlawful meddling or involvement in the affairs or property of others, often resulting in harm or damage.

Diminishing Returns

A rephrased definition: The principle stating that successive increases in inputs for production result in gradually decreasing increments in output.

Short Run

A period in which at least one of a firm's inputs is fixed and cannot be changed, while others may be varied to adjust production levels.