Which of the Following Statements Is FALSE

question 67

Multiple Choice

Which of the following statements is FALSE?

• A)We can use scenario analysis to evaluate alternative pricing strategies for our project.
• B)Scenario analysis considers the effect on NPV of changing multiple project parameters.
• C)The difference between the IRR of a project and the cost of capital tells you how much error in the cost of capital it would take to change the investment decision.
• D)Scenario analysis breaks the NPV calculation into its component assumptions and show how the NPV varies as each one of the underlying assumptions change.

---

Definitions:

Marginal Cost

The extra expense derived from the production of an additional unit of a product or service.

Perfectly Competitive

A market structure characterized by a large number of firms selling identical products, with no single firm able to influence the market price.

Oligopolistic

Describes a market structure in which a few firms dominate the industry, leading to limited competition.

Marginal Cost

The rise in overall expenses resulting from the manufacture of an extra unit of a product or service.