Which of the Following Statements Is CORRECT? Assume That All

question 97

Multiple Choice

Which of the following statements is CORRECT? Assume that all projects being considered have normal cash flows and are equally risky.

• A) If a project's IRR is equal to its cost of capital, then under all reasonable conditions, the project's IRR must be negative.
• B) If a project's IRR is equal to its cost of capital, then under all reasonable conditions the project's NPV must be zero.
• C) There is no necessary relationship between a project's IRR, its cost of capital, and its NPV.
• D) 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.
• E) If a project's IRR is equal to its cost of capital, then, under all reasonable conditions, the project's NPV must be negative.

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Definitions:

Hierarchy of Authority

A structured order of positions within an organization, where each level has specific powers and responsibilities over the levels below.

Formal Documentation

Official, written documents that record agreements, processes, or conditions to provide evidence or facilitate standardization.

Delegating Authority

The act of transferring decision-making power and responsibility from one individual to another, typically from a higher to a lower level in an organization.

Negotiable Instruments

Financial instruments that are transferable by endorsement or delivery, allowing the holder to take possession of the funds, such as checks or promissory notes.