Which of the Following Statements Is False

question 59

Multiple Choice

Which of the following statements is false?

• A) Sensitivity analysis allows us to explore the effects of errors in estimated inputs in our NPV analysis for the project.
• B) To compute the NPV for a project, you need to estimate the incremental cash flows and choose a discount rate.
• C) Estimates of the cash flows and cost of capital are often subject to significant uncertainty.
• D) When we are certain regarding the input to a capital budgeting decision, it is often useful to determine the break-even level of that input.

---

Definitions:

Production Capacity

The maximum output that a company can produce in a given period under normal conditions.

Variable Product Cost

Variable product cost includes costs that vary directly with the production volume, such as raw materials and direct labor.