Which of the Following Statements Is CORRECT

question 36

Multiple Choice

Which of the following statements is CORRECT?

• A) if the cost of capital declines, this lowers a project's npv.
• B) the npv method is regarded by most academics as being the best indicator of a project's profitability; hence, most academics recommend that firms use only this one method.
• C) a project's npv depends on the total amount of cash flows the project produces, but because the cash flows are discounted at the cost of capital, it does not matter if the cash flows occur early or late in the project's life.
• D) the npv and irr methods may give different recommendations regarding which of two mutually exclusive projects should be accepted, but they always give the same recommendation regarding the acceptability of a normal, independent project.
• E) the npv method was once the favorite of academics and business executives, but today most authorities regard the mirr as being the best indicator of a project's profitability.

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Definitions:

Elasticity of Resource Supply

A measure of how responsive the quantity supplied of a resource is to a change in price.

Elasticity of Product Demand

The degree to which the demand for a product changes in response to a change in its price.

Labor Costs

The total expenditure by businesses for paying their employees, including wages, benefits, and taxes.

Labor-Intensive

A process or industry that requires a large amount of labor relative to capital in its production processes.