Which of the Following Statements Is CORRECT

question 77

Multiple Choice

Which of the following statements is CORRECT?

• A) To find the MIRR, we first compound cash flows at the regular IRR to find the TV, and then we discount the TV at the WACC to find the PV.
• B) The NPV and IRR methods both assume that cash flows can be reinvested at the WACC. However, the MIRR method assumes reinvestment at the MIRR itself.
• C) If two projects have the same cost, and if their NPV profiles cross in the upper right quadrant, then the project with the higher IRR probably has more of its cash flows coming in the later years.
• D) If two projects have the same cost, and if their NPV profiles cross in the upper right quadrant, then the project with the lower IRR probably has more of its cash flows coming in the later years.
• E) For a project with normal cash flows, any change in the WACC will change both the NPV and the IRR.

---

Definitions:

Cost of Goods Sold

The direct costs attributable to the production of the goods sold by a company, including material and labor expenses.

Contribution Margin

The difference between the sales revenue of a product and the variable costs associated with producing it, used to cover fixed costs and contribute to profit.

Variable Costing

An accounting method that only includes variable production costs—costs that change with production volume—in the cost of goods sold.

Fixed Costs

Expenses that do not change with the level of goods or services produced by a business within a certain range of activity.