Which of the Following Statements Is False

question 81

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 shows how the NPV varies as each one of the underlying assumptions change.

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Definitions:

Convertible Bonds

Debt securities issued by a corporation that can be converted into a predetermined number of the company's shares at certain times during the bond's life, usually at the discretion of the bondholder.

Currency Speculation

The act of buying, selling, or holding currencies with the expectation that their value will change to make a profit.

Merger Arbitrage

An investment strategy that aims to profit from the successful completion of mergers and acquisitions by trading the stocks of the companies involved.

Risk Profile

An evaluation of an individual's willingness and ability to take risks, as well as the risks associated with their investment assets.