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

question 94

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 cash inflows at the WACC to find the terminal value (TV),then discounting this TV at the WACC.
• B) A project's regular IRR is found by discounting the cash inflows at the WACC to find the present value (PV),then compounding this PV to find the IRR.
• C) If a project's IRR is greater than the WACC,then its NPV must be negative.
• D) To find a project's IRR,we must solve for the discount rate that causes the PV of the inflows to equal the PV of the project's costs.
• E) To find a project's IRR,we must find a discount rate that is equal to the WACC.

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Definitions:

Objective Uncertainty

The state of having insufficient knowledge due to an inherently unpredictable environment or situation.

Contribution Margin

Contribution margin is the amount by which a product's sales revenue exceeds its variable costs, indicating the contribution of sales towards fixed costs and profits.

Break-even Point

The financial point at which total revenue equals total costs, resulting in zero net profit or loss.

Break-even Analysis

A financial calculation to determine the point at which revenue received equals the costs associated with receiving the revenue.