Which of the Following Statements Is False

question 33

Multiple Choice

Which of the following statements is false?

• A) The firm deducts a fraction of the investments in plant, property, and equipment each year as depreciation.
• B) If securities are fairly priced, the net present value of a fixed set of cash flows is independent of how those cash flows are financed.
• C) Sunk cost fallacy is a term used to describe the tendency of people to ignore sunk costs in capital budgeting analysis.
• D) A good rule to remember is that if our decision does not affect a cash flow then the cash flow should not affect our decision.

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Definitions:

Competitive Firm

A company operating in a market where it must compete with other firms for customers, often leading to innovation and efficient practices.

Market Price

The ongoing market rate for buying or selling an asset or service.

Highly Competitive

A market structure characterized by a large number of small firms, free entry and exit, and a high level of competition where no single firm can significantly influence market prices.

Simple Indicator

A quantitative measure that can be used to gauge or describe the performance or status of a particular phenomenon.