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

question 76

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) The higher the cost of capital used to calculate the NPV, the lower the calculated NPV will be.
• B) If a project's NPV is greater than zero, then its IRR must be less than the cost of capital.
• C) If a project's NPV is greater than zero, then its IRR must be less than zero.
• D) The NPVs of relatively risky projects should be found using relatively low costs of capital.
• E) A project's NPV is generally found by compounding the cash inflows at the cost of capital to find the terminal value (TV), then discounting the TV at the IRR to find its PV.

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Definitions:

Hypothetical Imperative

A command of reason that applies conditionally, suggesting an action to achieve a specific end, as opposed to a categorical imperative which is unconditional.

Humanity

The collective human race or the qualities, such as compassion and kindness, that are considered characteristic of humans.

Moral Law

The principles concerning the distinction between right and wrong behavior, often considered as inherent to human nature or divine command.

Law of Reason

A philosophical idea that moral and legal norms should be grounded in rational thought and logic.