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Which of the following statements are true? i. As a shareholder of the firm who is contemplating a new project, we should be more concerned with the financial break-even point than the accounting break-even point. ii. Traditional NPV analysis tends to overestimate the true value of a project since, it ignores the value of the real options embedded in the project. iii. For a project with conventional cashflows, we will always reach the financial h

Which of the following statements are true? i. As a shareholder of the firm who is contemplating a new project, we should be more concerned with the financial break-even point than the accounting break-even point. ii. Traditional NPV analysis tends to overestimate the true value of a project since, it ignores the value of the real options embedded in the project. iii. For a project with conventional cashflows, we will always reach the financial h

FINANCIAL ACCOUNTING
FINANCIAL ACCOUNTING
10th Edition
ISBN:9781259964947
Author:Libby
Publisher:Libby
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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Qd 57.

Which of the following statements are true? i. As a shareholder of the firm who is contemplating a new project, we should be more concerned with the financial break-even point than the accounting break-even point. ii. Traditional NPV analysis tends to overestimate the true value of a project since, it ignores the value of the real options embedded in the project. iii. For a project with conventional cashflows, we will always reach the financial break-even point before the accounting break-even since, financial profitability correctly accounts for the timing and the riskiness of the cashflows. iv. The greater the cash outflows, the more likely the project has a negative net present value, all else the same ii and iii None of the statements are true. iv only il and iv i and iv
Transcribed Image Text:Which of the following statements are true? i. As a shareholder of the firm who is contemplating a new project, we should be more concerned with the financial break-even point than the accounting break-even point. ii. Traditional NPV analysis tends to overestimate the true value of a project since, it ignores the value of the real options embedded in the project. iii. For a project with conventional cashflows, we will always reach the financial break-even point before the accounting break-even since, financial profitability correctly accounts for the timing and the riskiness of the cashflows. iv. The greater the cash outflows, the more likely the project has a negative net present value, all else the same ii and iii None of the statements are true. iv only il and iv i and iv
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