Which of the Following Statements Is False

question 45

Multiple Choice

Which of the following statements is false?

• A) Problems can arise using the IRR method when the mutually exclusive investments have different cash flow patterns.
• B) The IRR is affected by the scale of the investment opportunity.
• C) Multiple incremental IRRs might exist.
• D) The incremental IRR rule assumes that the riskiness of the two projects is the same.

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Definitions:

Return on Investment

A measure of the profitability and efficiency of an investment, calculated as the net profit of the investment divided by its initial cost.

Invested Assets

Assets that are acquired for the purpose of generating income or appreciating in value, such as stocks, bonds, and real estate.

Operating Income

This is the income earned from normal business operations, excluding revenue from investments and other non-operational income.

Investment Turnover

A measure of a company’s efficiency in using its assets to generate sales or revenue, indicating how quickly investments are converted into income.