Different Discounted Cash Flow Evaluation Methods May Provide Conflicting Rankings

question 135

Multiple Choice

Different discounted cash flow evaluation methods may provide conflicting rankings of investment projects when

• A) the size of investment outlays differ.
• B) the projects are mutually exclusive.
• C) the accounting policies differ.
• D) the internal rate of return equals the cost of capital.

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Definitions:

Financing Activities

Transactions and events where cash is raised or paid back to finance the company's operations, including issuing debt and equity or repaying loans.

Issuing Debt

Issuing debt refers to the process by which a corporation or government raises funds by selling bonds, notes, or other debt instruments to investors.

Repaying

The process of paying back money previously borrowed from a lender.

Cost of Goods Sold

The direct costs attributable to the production of the goods sold by a company, including material, labor, and overhead expenses.