Which of the assumption is not correct for Investment Decision under as per Irving Fisher?

Select one:

a.

The decision-maker is only concerned with making investment decisions over a single period time horizon - we will treat this as one year for the sake of simplicity.

b.

The size and timing of any investment's cash outflow and subsequent cash inflow is unknown because of future uncertainty and so great amount of risk is involved in the investment decision.

c.

Only 'physical' investment opportunities are available (land, labour and machinery) to produce a future return. All investment project cash flows are entirely independent of each other.

d.

All investment projects are infinitely divisible; therefore fractions of projects may be undertaken, and they exhibit decreasing returns to scale.

IRR decision rule is safe to apply to single, independent decision situations but it cannot reliably be used to judge between alternative projects.

Select one:

True

False

agency problem can be resolved by two ways. Shareholders can provide managerial incentives either based on future profitability or future dividend growth forecasts.

Select one:

True

False

We can formulate four basic axioms regarding the behavior of investors when making decisions. Which one is wrong?

Select one:

a.

Investors are able to choose between alternatives by ranking them in some order of merit. However, all these projects must belong to a same industry.

b.

Any such ranking of alternatives is 'transitive' in nature.

c.

Investors do not differentiate between alternatives that have the same degree of risk.

d.

Investors are able to specify for any investment whose returns are uncertain, an exactly equivalent alternative which would be equally preferred but which would involve a certain return.