The stand-alone principle means that:
A) projects should not be evaluated against one another
B) projects must operate independently of the firm's other projects
C) analysts should focus on the project's cash flows, uncontaminated by cash flows from the firm's other activities
D) projects should be rejected that have the same IRR

Question

Quizplus · Accepted Answer

The stand-alone principle requires that analysts evaluate a project's cash flows independently of the firm's other activities, so that the project's true profitability can be determined. Therefore, choice C is the correct answer. Choices A, B, and D are incorrect because they do not accurately reflect the stand-alone principle.

The Stand-Alone Principle Means That