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

question 71

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 NPV is found by compounding the cash inflows at the IRR to find the terminal value (TV),then discounting the TV at the WACC.
• B) The lower the WACC used to calculate it,the lower the calculated NPV will be.
• C) If a project's NPV is less than zero,then its IRR must be less than the WACC.
• D) If a project's NPV is greater than zero,then its IRR must be less than zero.
• E) The NPV of a relatively low-risk project should be found using a relatively high WACC.

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Definitions:

Nonconscious Responding

Psychological processes that occur without conscious awareness, influencing perceptions, thoughts, and actions in ways not accessible to introspection.

Dialectical Reasoning

A method of argument that involves the contradiction between two opposing views, leading to a synthesis of ideas.

Tacit Knowledge

Knowledge that is difficult to transfer to another person by means of writing it down or verbalizing it, often acquired through personal experience.

Dialectical Thinking

An approach to understanding concepts by reconciling contradictions in a coherent whole.