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

question 33

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

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Definitions:

"The Answer"

Often used metaphorically to denote a solution or response that resolves a question or problem comprehensively.

Consideration

Something of value that is exchanged between parties in a contract, making it legally binding.

Illusory Promise

A situation in which a party appears to commit to something but really has not committed to anything. It is not a promise and thus not consideration.

Valid Consideration

Valid consideration in a contract represents something of value that is given by all parties involved, serving as the reason or inducement to enter into the contract.