Which of the Following Statements Is FALSE

question 55

Multiple Choice

Which of the following statements is FALSE?

• A)Sensitivity analysis allows us to explore the effects of errors in our estimated inputs in our NPV analysis for the project.
• B)To compute the NPV for a project,you need to estimate the incremental cash flows and choose a discount rate.
• C)Estimates of the cash flows and cost of capital are often subject to significant uncertainty.
• D)When we are certain regarding the input to a capital budgeting decision,it is often useful to determine the break-even level of that input.

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Definitions:

Interest Expense

The financial charge an entity experiences for borrowing money over a specific period.

Quick (Acid Test) Ratio

A liquidity measure evaluating a company's ability to cover its short-term liabilities with its most liquid assets.

Current Liabilities

Current liabilities are a company's debts or obligations that are due to be paid to creditors within one year.

Temporary Investments

Securities or assets that a company intends to sell within a short period, typically one year, to generate income.