Which of the Following Statements Is False

question 53

Multiple Choice

Which of the following statements is false?

• A) The incremental IRR investment rule applies the IRR rule to the difference between the cash flows of the two mutually exclusive alternatives.
• B) When a manager must choose among mutually exclusive investments, the NPV rule provides a straightforward answer.
• C) The likelihood of multiple IRRs is greater with the regular IRR rule than with the incremental IRR rule.
• D) Problems can arise using the IRR method when the mutually exclusive investments have differences in scale.

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Definitions:

Normal Return

The minimum profit needed by investors to justify the capital invested in a business venture, often equated to the opportunity cost.

Total Revenue

Total Revenue is the total amount of money received by a firm from sales of goods or services before any expenses are deducted.

Economic Profit

The contrast between cumulative revenue and cumulative costs, taking into account both clear and veiled expenses.

Economic Costs

The sum of explicit costs (direct payment for resources) and implicit costs (opportunity costs of using resources owned by the firm).