Which of the Following Statements Is FALSE

question 10

Multiple Choice

Which of the following statements is FALSE?

• A)The break-even level of an input is the level for which the investment has an IRR of zero.
• B)The most difficult part of capital budgeting is deciding how to estimate the cash flows and the cost of capital.
• C)When evaluating a capital budgeting project,financial managers should make the decision that maximizes NPV.
• D)Sensitivity analysis reveals which aspects of the project are most critical when we are actually managing the project.

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Definitions:

Financial Leverage

The use of borrowed money (debt) to finance the acquisition of assets, with the expectation that the profits will be greater than the interest payable.

Tax Deductible

Refers to certain expenses that can be subtracted from income to reduce the total taxable income.

Capital Gains

Profit earned from the sale of assets like stocks or real estate, where the sale price exceeds the purchase price.

Ordinary Income

Income earned from standard operations of a business or through wages, as opposed to capital gains or investment income.