Which of the Following Statements Is False

question 51

Multiple Choice

Which of the following statements is false?

• A) Traditionally, managers have used the equivalent annual benefit method to choose between projects of different lives.
• B) The equivalent annual benefit method ignores the value of any real options because it assumes that the projects will always be replaced at their original terms.
• C) If the future costs (or benefits) are certain with mutually exclusive projects, then we must use a real options approach to determine the correct decision.
• D) The equivalent annual benefit method accounts for the difference in project lengths by calculating the constant payment over the life of the project that is equivalent to receiving the NPV today and then selecting the project with the higher equivalent annual benefit.

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Definitions:

Linear Rate

In the context of springs, a linear rate refers to a constant rate of compression or extension, meaning the force required to compress or extend the spring is consistent throughout its movement.

Variable Rate

An interest or finance charge rate that can change over the period of the loan or credit agreement, often tied to an index or benchmark.

Coil Springs

Mechanical devices that can compress or extend to absorb impact or maintain force between contacting surfaces.

Hub Carriers

Component of a vehicle's suspension system that holds the wheel bearing and is mounted on the suspension.