Assume a Project Has Normal Cash Flows (I

question 54

Multiple Choice

Assume a project has normal cash flows (i.e., the initial cash flow is negative, and all other cash flows are positive) . Which of the following statements is most correct?

• A) All else equal, a project's IRR increases as the cost of capital declines.
• B) All else equal, a project's NPV increases as the cost of capital declines.
• C) All else equal, a project's MIRR is unaffected by changes in the cost of capital.
• D) Answers a and b are correct.
• E) Answers b and c are correct.

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Definitions:

Accounting Errors

Mistakes or omissions made in the accounting process, which may require adjustments to previously published financial statements.

Internal Audit Staff

Employees of an organization who perform independent and objective evaluations of the effectiveness and compliance of the firm's operations, including the reliability of financial reporting.

Consignment

An arrangement where goods are left in the possession of another party to sell, but ownership and title remain with the supplier until the goods are sold.

Revenue Recognition

The accounting principle governing when revenue is considered earned and can be recorded in the financial statements.