a. If a project\'s IRR is equal to its WACC, then, under all reasonable conditio

Question

a. If a project's IRR is equal to its WACC, then, under all reasonable conditions, the project's NPV must be negative
b. If a project's IRR is equal to its WACC, the under all reasonable conditions, the project's IRR must be negative.
c. If a project's IRR is equal to its WACC, then under all reasonable conditions the project's NPV must be zero.
d. There is no necessary relationship between a project's IRR, its WACC, and its NPV
e. When evaluating mutually exclusive projects, those projects with relatively long lives will tend to have relatively high NPVs when the cost of capital is relatively high.

Explanation / Answer

IRR is defined as the rate that makes the NPV = 0 If cashflows discounted at the Wacc equals an NPV of 0, then WACC = IRR A. this is incorrect it would yield an npv of 0 B. Again incorrect C. Correct D. Wrong there is a very clear relationship between IRR, WACC and NPV. When IRR>WACC then NPV >0, if IRR

Related Questions

Navigate

• Browse (All)
• Browse A
• Subjects

---

---

Integrity-first tutoring: explanations and feedback only — we do not complete graded work. Learn more.