Which of the following statements is FALSE? Question 25 options: 1) In general,

Question

Which of the following statements is FALSE?

Question 25 options:

1) In general, the difference between the cost of capital and the internal rate of return (IRR) is the maximum amount of estimation error in the cost of capital estimate that can exist without altering the original decision. 2) The internal rate of return (IRR) can provide information on how sensitive your analysis is to errors in the estimate of your cost of capital. 3) 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. 4) If the cost of capital estimate is more than the internal rate of return (IRR), the net present value (NPV) will be positive.

Explanation / Answer

Answer is (4)

Option – (4) is false statement because if the cost of capital estimate is more than the internal rate of return (IRR), the net present value (NPV) will be negative.

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