Which of the Following Statements Is CORRECT? Assume That the Project

question 69

Multiple Choice

Which of the following statements is CORRECT? Assume that the project being considered has normal cash flows,with one outflow followed by a series of inflows.

• A) A project's regular IRR is found by compounding the initial cost at the WACC to find the terminal value (TV),then discounting the TV at the WACC.
• B) A project's regular IRR is found by compounding the cash inflows at the WACC to find the present value (PV),then discounting the TV to find the IRR.
• C) If a project's IRR is smaller than the WACC,then its NPV will be positive.
• D) A project's IRR is the discount rate that causes the PV of the inflows to equal the project's cost.
• E) If a project's IRR is positive,then its NPV must also be positive.

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Definitions:

Cash Collected

The total amount of cash received by a company during a specific period, including receipts from sales, services, and other sources.

Quality

The degree to which a product, service, or process is free from defects, deficiencies, and significant variations, meeting specified standards or customer expectations.

Income Ratio

A financial metric that compares various income streams of a business to a key metric such as sales, to evaluate performance.

Prepaid Expenses

Payments made in advance for goods or services to be received in the future, recorded as assets on the balance sheet until they are consumed or used.