Which of the Following Statements Is FALSE

question 25

Multiple Choice

Which of the following statements is FALSE?

• A)The break-even level of an input is the level for which the investment has an internal rate of return (IRR)of zero.
• B)The most difficult part of capital budgeting is deciding how to estimate the cash flows and the cost of capital.
• C)When evaluating a capital budgeting project,financial managers should make the decision that maximizes net present value (NPV).
• D)Sensitivity analysis reveals which aspects of the project are most critical when we are actually managing the project.

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Definitions:

Discount Rate

The interest rate used to discount future cash flows to their present value, often used in investment valuation and project evaluation.

Annual Net Cash Inflows

The total amount of cash received minus cash expenses over a year.

Net Present Value

The discrepancy in the present valuation of incoming and outgoing cash flows within a certain timeframe.

Useful Life

The estimated duration of time a fixed asset is considered to be productive for its intended use.