Which of the Following Statements Is CORRECT? Assume That All

question 32

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 WACC,then,under all reasonable conditions,the project's NPV must be negative.
• B) If a project's IRR is equal to its WACC,then 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.

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Definitions:

Preliminary Design

Preliminary design is the initial phase in the design process, focusing on outlining the basic concept, specifications, and feasibility of a project before detailed planning begins.

Product Decline

The phase in a product's lifecycle where sales and market share begin to fall due to various factors like market saturation or newer alternatives.

Throughput

The rate at which a system generates its product or completes a process, often used in manufacturing and software development.

Operating Expenses

The ongoing expenses incurred in the day-to-day operations of a business, excluding costs directly associated with the production of goods or services.