Which of the Following Statements Is FALSE

question 16

Multiple Choice

Which of the following statements is FALSE?

• A)The profitability index rule of thumb raises the bar on the NPV to take into account the option to wait.
• B)In practice,correctly modeling the sources of uncertainty and the appropriate dynamic decisions usually requires an extensive amount of time and financial expertise.
• C)Some firms use the following rule of thumb: Invest whenever the profitability index is below a specified level.
• D)Instead of raising the bar on the NPV,the hurdle rate rule raises the discount rate.

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Definitions:

Degree Of Operating Leverage

A measure of how much a company's operating income can increase with a given increase in sales. It highlights the sensitivity of a company's operating income to changes in sales.

Percentage Change

A mathematical calculation that shows how much a quantity has increased or decreased as a percentage of its previous value, often used to measure growth rates or changes in financial metrics.

OCF

Operating Cash Flow, which is the cash generated by normal business operations.

Sales Quantity

The total number of units of a product or service sold during a specific period of time.