Which of the Following Statements Is FALSE

question 18

Multiple Choice

Which of the following statements is FALSE?

• A)The hurdle rate rule for projects with the option to delay uses a lower discount rate than the cost of capital to compute the NPV,but then applies the regular NPV rule: Invest whenever the NPV calculated using this lower discount rate is positive.
• B)While using a hurdle rate rule for deciding when to invest might be a cost-effective way to make investment decisions,it is important to remember that this rule does not provide an accurate measure of value.
• C)When the cash flows are constant and perpetual,and the reason to wait derives solely from interest rate uncertainty,the hurdle rate rule of thumb is always exact.However,when these conditions are not satisfied,the rule of thumb merely approximates the correct decision.
• D)When a firm faces the same uncertainty for most of its investment decisions,using a single profitability index criterion for all projects can provide a useful rule of thumb to account for cash flow uncertainty.

---

Definitions:

Developmental Stages

Specific phases through which an individual passes as they grow and mature, each characterized by distinct psychological or physical attributes.

Joan Erikson

A psychologist who collaborated extensively with her husband, Erik Erikson, contributing to the field of human development, particularly regarding the stages of psychosocial development.

Adolescence

Stage of life commonly defined as the onset of puberty when sexual maturity or the ability to reproduce is attained.

Middle-Age

A period in a person's life typically ranging from about 45 to 65 years old, characterized by transitions in physical, emotional, and social aspects.