Which of the Following Statements Is CORRECT

question 103

Multiple Choice

Which of the following statements is CORRECT?

• A) The NPV method assumes that cash flows will be reinvested at the risk-free rate, while the IRR method assumes reinvestment at the IRR.
• B) The NPV method assumes that cash flows will be reinvested at the cost of capital, while the IRR method assumes reinvestment at the risk-free rate.
• C) The NPV method does not consider all relevant cash flows, particularly cash flows beyond the payback period.
• D) The IRR method does not consider all relevant cash flows, particularly cash flows beyond the payback period.
• E) The NPV method assumes that cash flows will be reinvested at the cost of capital, while the IRR method assumes reinvestment at the IRR.

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Definitions:

Mood-congruent Memory

The tendency to recall experiences that are consistent with one's current mood.

State-dependent Memory

The phenomenon where information learned in a particular state of mind is more easily recalled when in that same state.

Encoding Strategies

Techniques used to process and store information in memory more effectively.

Cues in Retrieval

Stimuli or signals that help bring a memory or piece of information to mind, facilitating the process of recalling information.