Which of the Following Statements Is CORRECT? Assume That All

question 71

Multiple Choice

Which of the following statements is CORRECT? Assume that all projects being considered have normal cash flows and are equally risky.

• A) If a project's IRR is equal to its WACC, then under all reasonable conditions, the project's IRR must be negative.
• B) If a project's IRR is equal to its WACC, then under all reasonable conditions the project's NPV must be zero.
• C) There is no necessary relationship between a project's IRR, its WACC, and its NPV.
• D) When evaluating mutually exclusive projects, those projects with relatively long lives will tend to have relatively high NPVs when the cost of capital is relatively high.
• E) If a project's IRR is equal to its WACC, then, under all reasonable conditions, the project's NPV must be negative.

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Definitions:

Prepaid Expenses

Expenses paid in advance for goods or services to be received in the future, recognized as assets on the balance sheet until they are expensed.

Management Services

Provided by a specialized team or firm, these services include a wide range of administrative and support functions to improve efficiency and effectiveness within an organization.

Adjusting Entry

An accounting journal entry made at the end of an accounting period to record any unrecognized income or expenses for that period.

Office Supplies

Items such as pens, paper, staplers, and other materials used daily by businesses and considered as short-term assets on the balance sheet.