8. Which of the following statements is FALSE? A) In general, the difference between the cost of capital and the IRR is the maximum amount of estimation error in the cost of capital estimate that can exist without altering the original decision. B) The IRR can provide information on how sensitive your analysis is to errors in the estimate of your cost of capital. C) If you are unsure of your cost of capital estimate, it is important to determine how sensitive your analysis is to errors in this estimate. D) If the cost of capital estimate is more than the IRR, the NPV will be positive.

Essentials Of Investments
11th Edition
ISBN:9781260013924
Author:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Publisher:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Chapter1: Investments: Background And Issues
Section: Chapter Questions
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8. Which of the following statements is FALSE?
A) In general, the difference between the cost of capital and the IRR is the maximum
amount of estimation error in the cost of capital estimate that can exist without altering the
original decision.
B) The IRR can provide information on how sensitive your analysis is to errors in the
estimate of your cost of capital.
C) If you are unsure of your cost of capital estimate, it is important to determine how
sensitive your analysis is to errors in this estimate.
D) If the cost of capital estimate is more than the IRR, the NPV will be positive.
Transcribed Image Text:8. Which of the following statements is FALSE? A) In general, the difference between the cost of capital and the IRR is the maximum amount of estimation error in the cost of capital estimate that can exist without altering the original decision. B) The IRR can provide information on how sensitive your analysis is to errors in the estimate of your cost of capital. C) If you are unsure of your cost of capital estimate, it is important to determine how sensitive your analysis is to errors in this estimate. D) If the cost of capital estimate is more than the IRR, the NPV will be positive.
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