Question
Which of the following statements is incorrect? a. The accounting rate of return (ARR) computes the return on a capital project using accounting numbers, the
Which of the following statements is incorrect?
a. The accounting rate of return (ARR) computes the return on a capital project using accounting numbers, the project's net income (NI) and book value (BV), rather than cash flow data.
b. Most of the answers are correct except one.
c. Projects may be mutually exclusive because they are substitutes for one another or because the firm has a funding constraint.
d. Capital rationing puts a funding constraint on investments and makes some projects mutually exclusive.
e. A positive NPV project decreases the value of the firm and stockholders' wealth.
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