Which of the Following Statements Is CORRECT

question 75

Multiple Choice

Which of the following statements is CORRECT?

• A) If a project has "normal" cash flows,then its IRR must be positive.
• B) If a project has "normal" cash flows,then its MIRR must be positive.
• C) If a project has "normal" cash flows,then it will have exactly two real IRRs.
• D) The definition of "normal" cash flows is that the cash flow stream has one or more negative cash flows followed by a stream of positive cash flows and then one negative cash flow at the end of the project's life.
• E) If a project has "normal" cash flows,then it can have only one real IRR,whereas a project with "nonnormal" cash flows might have more than one real IRR.

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Definitions:

Ratio Analysis

A quantitative method of gaining insight into a company's liquidity, operational efficiency, and profitability by comparing financial statement items.

Financial Statements

Official records that outline a company's financial activities and conditions, including the balance sheet, income statement, and cash flow statement.

Firm's Financial Position

The status of a company's assets, liabilities, and equity at a given point in time, as reflected in its financial statements.

Market/Book Ratio

Also known as the price-to-book ratio, it compares a company's market value with its book value, indicating how much investors are paying for each dollar of net assets.