Which of the Following Statements Regarding Value Additivity Is False

question 1

Multiple Choice

Which of the following statements regarding value additivity is false?

• A) The value of a portfolio is equal to the sum of the values of its parts.
• B) The price or value of the entire firm is equal to the sum of the values of all projects and investments within the firm.
• C) To maximize the value of the entire firm, managers should make decisions that maximize NPV.
• D) Value additivity does not have important consequences for the value of the entire firm, only on portfolios of firms.

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Definitions:

Inventory System

A method for tracking the quantities, locations, and statuses of products a company has in stock, both for sales and production purposes.

Computerized

Systems or processes that are performed or managed by computers, typically involving automation of manual tasks.

Cost Flow Assumption

An accounting method used to determine the cost of goods sold and ending inventory, such as FIFO, LIFO, or average cost.

Periodic

An accounting system where inventory and cost of goods sold are determined at the end of an accounting period, rather than tracked continuously.