Which of the Following Statements Is FALSE

question 75

Multiple Choice

Which of the following statements is FALSE?

• A) The payback rule is useful in cases where the cost of making an incorrect decision might not be large enough to justify the time required for calculating the net present value (NPV).
• B) The payback rule is reliable because it considers the time value of money and depends on the cost of capital.
• C) For most investment opportunities, expenses occur initially and cash is received later.
• D) Fifty percent of firms surveyed reported using the payback rule for making decisions.

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Definitions:

Cost Basis

The original value of an asset for tax purposes, usually the purchase price, which is used to determine capital gain or loss upon sale.

Fixed Asset

Long-term tangible assets held for business use and not expected to be converted to cash in the current or upcoming fiscal year.

Long-Lived

Pertaining to assets, it refers to items that are expected to provide economic benefits over a prolonged period, generally exceeding one year.

Normal Operations

The regular, day-to-day activities carried out by a business to generate revenue and profit.