Which of the following statements is correct? Assume that the project being cons

Question

Which of the following statements is correct? Assume that the project being considered has normal cash flows, with one outflow followed by a series of inflows. A. A projects's NPV is found by compounding the cash inflows at the IRR to find the terminal value (TV), then discounting the TV at the WACC; B. the lower the WACC used to calculate a project's NPV, the lower the calculated NPV will be; C. If a project's NPV is less than zero, then its IRR must be less than the WACC; D. If a project's NPV is greater than zero, then its IRR must be less than zero; E. THe NPV of a relative low risk project should be found using a relatively high WACC

Explanation / Answer

Which of the following statements is correct? Assume that the project being considered has normal cash flows, with one outflow followed by a series of inflows.

A. A projects's NPV is found by compounding the cash inflows at the IRR to find the terminal value (TV), then discounting the TV at the WACC;

B. the lower the WACC used to calculate a project's NPV, the lower the calculated NPV will be

; C. If a project's NPV is less than zero, then its IRR must be less than the WACC;-correct answer

D. If a project's NPV is greater than zero, then its IRR must be less than zero;

E. THe NPV of a relative low risk project should be found using a relatively high WACC

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