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

question 28

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) The lower the WACC used to calculate a project's NPV, the lower the calculated NPV will be.
• B) If a project's NPV is less than zero, then its IRR must be less than the WACC.
• C) If a project's NPV is greater than zero, then its IRR must be less than zero.
• D) The NPV of a relatively low-risk project should be found using a relatively high WACC.
• E) 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.

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Definitions:

Demand Uncertainty

The degree of unpredictability or variability regarding customer demand for a product or service, often affecting inventory management and supply chain planning.

Performance Level

A measure of an individual, organization, or system's efficiency, effectiveness, and ability to meet its goals.

Excess Capacity

Refers to the situation where a firm or economy can produce more goods or services than currently produced due to available resources not being fully utilized.

Efficiency

The extent to which time, effort, or cost is well used for the intended task or purpose within supply chain processes.