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

question 55

Multiple Choice

Which of the following statements is CORRECT? Assume that the project being considered has normal cash flows,with one cash outflow at t = 0 followed by a series of positive cash flows.

• A) A project's MIRR is always less than its regular IRR.
• B) If a project's IRR is greater than its WACC, then its MIRR will be greater than the IRR.
• C) To find a project's MIRR, we compound cash inflows at the regular IRR and then find the discount rate that causes the PV of the terminal value to equal the initial cost.
• D) To find a project's MIRR, the textbook procedure compounds cash inflows at the WACC and then finds the discount rate that causes the PV of the terminal value to equal the initial cost.
• E) A project's MIRR is always greater than its regular IRR.

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Definitions:

Economic Shift

A significant change in the condition or direction of an economy, often marked by a variation in key economic indicators.

Production Possibility Frontier

The production possibility frontier is a curve illustrating the maximum feasible amounts of two commodities that a business can produce with its available resources and technology.

Scarce Resources

Natural or human assets available in limited quantities relative to their demand, leading to the necessity of economic allocation.

Capital Goods

Long-lasting goods acquired by businesses to produce goods or services, encompassing items like machinery, tools, and buildings.