Which of the Following Statements Is True

question 48

Multiple Choice

Which of the following statements is true?

• A) The IRR method ignores the time value of money.
• B) The hurdle rate used with the IRR method is determined subjectively and therefore is arbitrary.
• C) Many managers have difficulty comprehending the rate of return answer determined by the IRR method.
• D) Multiple IRRs can result for some projects which can lead to a difficulty for the IRR method.
• E) Both (b) and (d) are true

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Definitions:

Investing Activities

Financial actions that involve the purchase and sale of long-term assets and other investments not considered to be cash equivalents.

Financing Activities

Transactions that involve raising capital or repaying funds, including issuing shares, borrowing, or repaying debt.

Financial Statement Users

Individuals or groups, such as investors, creditors, and regulatory agencies, who analyze financial statements to make informed decisions.

Cash Flows

The entirety of monetary transactions coming into and going out of a corporation, crucially affecting its immediate financial resources.