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.

---

Definitions:

Capital Deepening

An increase in the amount of capital per worker; one source of rising labor productivity.

Capital Per Worker

A ratio measuring the amount of capital available to each worker, often used as an indicator of labor productivity.

Developed Country

A nation with a high level of industrialization, a high standard of living, and a well-developed infrastructure.

Pakistan

A country in South Asia, bordered by India, Afghanistan, Iran, and China, with Islamabad as its capital.