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:

Interest Paid

The amount paid by a borrower to a lender for the privilege of borrowing money, typically expressed as an annual percentage rate.

Effective Interest Rate

The true rate of simple interest.

Contract Interest Rate

The agreed-upon rate of interest that will be charged or paid on a financial contract, such as a loan or bond.

Issued at Discount

When a bond or other security is sold for less than its face value.