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

question 42

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) If Project A has a higher IRR than Project B,then Project A must have the lower NPV.
• B) If Project A has a higher IRR than Project B,then Project A must also have a higher NPV.
• C) The IRR calculation implicitly assumes that all cash flows are reinvested at the WACC.
• D) The IRR calculation implicitly assumes that cash flows are withdrawn from the business rather than being reinvested in the business.
• E) If a project has normal cash flows and its IRR exceeds its WACC,then the project's NPV must be positive.

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Definitions:

Evaluate Risk

The process of identifying and analyzing potential issues that could negatively impact key business initiatives or projects.

Sales Forecasts

Predictions of the future sales revenue of a product or service within a specified time frame, based on historical data, market trends, and economic conditions.

Evaluate Strengths

The process of identifying and assessing the strong points or advantages that an individual, company, or product possesses.