Which of the Following Statements Regarding the Assumptions Underlying Discounted

question 18

Multiple Choice

Which of the following statements regarding the assumptions underlying discounted cash flow analysis is/are true?
i. All cash flows are treated as though they occur at year-end.
ii. Cash flows associated with the investment project are treated as if they are known with certainty.
iii. The discount rate is always the same as the average cost of capital.

• A) i
• B) i and ii
• C) ii
• D) All of the given answers

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Definitions:

Psychological Inconsistency

The state of holding conflicting cognitions (e.g., beliefs, attitudes) simultaneously, which can lead to discomfort and attempts to resolve the contradiction.

Induction

A logical process in which multiple premises, all believed true or found true most of the time, are combined to obtain a specific conclusion.

Deduction

A logical process wherein a conclusion follows necessarily from the premises presented, if the premises are true, the conclusion must also be true.

Theory of Planned Behavior

A psychological theory that links beliefs and behavior, suggesting that an individual's behavioral intentions are shaped by their attitudes, subjective norms, and perceived control over the behavior.