The NPV and IRR of any capital budgeting project are random variables with means that represent their most likely values and variances that reflect:
A)variations in profit.
B)value inconsistencies.
C)risk.
D)unstable expectancies.

Question

Quizplus · Accepted Answer

The variances in NPV and IRR represent the risk involved in the capital budgeting project. Therefore, the correct answer is option C, which states that the variances reflect risk. Options A, B, and D are incorrect as they do not accurately represent the variables and their variances.

The NPV and IRR of Any Capital Budgeting Project Are