Which of the following statements about capital budgeting evaluation methods is FALSE?

A: NPV does not take the profit of an investment into account since it concentrates on a projectâ??s effect on the value of the firm.

B: The IRR and NPV will never disagree about whether or not a project is acceptable.

C: The IRR and NPV methods both incorporate the firmâ??s WACC:

D: The IRR can be defined as the discount rate that results in a project having an NPV equal to zero.

Answer: A: NPV does measure the effect of an investment on the value of the firm and does so by discounting future cash flows by the WACC: If the return of the project is greater than the WACC the NPV will be positive. Therefore, the return is greater than the cost and the project is profitable.