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

question 6

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 regular IRR is found by compounding the initial cost at the WACC to find the terminal value (TV), then discounting the TV at the WACC.
• B) A project's regular IRR is found by compounding the cash inflows at the WACC to find the present value (PV), then discounting the TV to find the IRR.
• C) If a project's IRR is smaller than the WACC, then its NPV will be positive.
• D) A project's IRR is the discount rate that causes the PV of the inflows to equal the project's cost.

---

Definitions:

Economic Profit

The financial gain that exceeds both the total opportunity costs of production and the accounting costs, reflecting the additional value created from business activities.

Accounting Profit

The profit a company has after deducting all its expenses from its total revenue.

Verizon Wireless

A major American telecommunications company known for providing wireless products and services.

Implicit Cost

The opportunity cost incurred by using assets, resources, or funds for a specific purpose rather than the next best alternative.