Which of the following statements is FALSE?
A) Sensitivity analysis allows us to explore the effects of errors in our estimated inputs in our net present value (NPV) analysis for the project.
B) To compute the net present value (NPV) for a project, you need to estimate the incremental cash flows and choose a discount rate.
C) Estimates of the cash flows and cost of capital are often subject to significant uncertainty.
D) When we are certain regarding the input to a capital budgeting decision, it is often useful to determine the break-even level of that input.
Answer: D
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Students, and managers alike, are continually reminded to avoid negative-NPV projects. Which of the following projects may be acceptable even at a loss?
A) a capacity expansion project B) a machine replacement project C) a cost-reduction project D) a pollution-control project
U.S. Treasury bills are exempt from federal, state, and local income taxes
Indicate whether the statement is true or false