Assume a Project Has Normal Cash Flows

question 104

Multiple Choice

Assume a project has normal cash flows.All else equal,which of the following statements is CORRECT?

• A) A project's IRR increases as the WACC declines.
• B) A project's NPV increases as the WACC declines.
• C) A project's MIRR is unaffected by changes in the WACC.
• D) A project's regular payback increases as the WACC declines.
• E) A project's discounted payback increases as the WACC declines.

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Definitions:

Bundle

A combination or collection of goods or services that is considered as a single unit by consumers or businesses.

Cobb-Douglas Utility

A specific form of utility function used in economics to represent preferences of consumers, characterized by a functional form that is a particular type of product of goods' amounts raised to various powers.

Compensating Variation

An economic concept referring to the amount of money one would need to attain the same level of utility after a price change.

Equivalent Variation

A measure in economics that calculates the change in wealth needed to reach utility before a price change, preserving consumer satisfaction levels.