27 NPV profile graph Which of the following statements is CORRECT? An NPV profil

Question

27 NPV profile graph

Which of the following statements is CORRECT? An NPV profile graph shows how a project's payback varies as the cost of capital changes. The NPV profile graph for a normal project will generally have a positive (upward) slope as the life of the project increases. An NPV profile graph is designed to give decision makers an idea about how a project's risk varies with its life. An NPV profile graph is designed to give decision makers an idea about how a project's contribution to the firm's value varies with the cost of capital. We cannot draw a project's NPV profile unless we know the appropriate WACC for use in evaluating the project's NPV.

Explanation / Answer

We cannot draw the project NPV profile unless we know the appropriate WACC for use in evaluating project NPV since unless we discount future cash flows we cannot determine project NPV and WACC is used as discount factor.

Related Questions

Navigate

• Browse (All)
• Browse 2
• Subjects

---

---

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