Which of the Following Statements Is False

question 6

Multiple Choice

Which of the following statements is false?

• A) We can use scenario analysis to evaluate alternative pricing strategies for our project.
• B) Scenario analysis considers the effect on NPV of changing multiple project parameters.
• C) The difference between the IRR of a project and the cost of capital tells you how much error in the cost of capital it would take to change the investment decision.
• D) Scenario analysis breaks the NPV calculation into its component assumptions and show how the NPV varies as each one of the underlying assumptions change.

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Definitions:

Management Decisions

Choices and judgments made by the management team of an organization regarding strategic planning, resource allocation, and operations.

Pooling Costs

Pooling costs involves aggregating various types of indirect costs together into one cost pool, which is then allocated to different products or services based on certain criteria.

Pool Rate

A predetermined overhead rate used in cost accounting to allocate overhead costs to various cost objects, based on a particular cost pool.

Budgeting Technique

A budgeting technique is a method or approach used to plan and manage financial resources, forecasting income and expenditures over a set period.