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

question 17

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 MIRR is always less than its regular IRR.
• B) If a project's IRR is greater than its WACC, then the MIRR will be less than the IRR.
• C) If a project's IRR is greater than its WACC, then the MIRR will be greater than the IRR.
• D) To find a project's MIRR, we compound cash inflows at the IRR and then discount the terminal value back to t = 0 at the WACC.
• E) A project's MIRR is always greater than its regular IRR.

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Definitions:

Inventories

Quantifiable goods or materials held by a company for the purpose of sale in the ordinary course of business, production, or use in creating goods and services.

Depreciable Asset

An asset that decreases in value over time due to use, wear and tear, or obsolescence and can be written off against income.

Useful Life

The estimated period over which an asset is expected to be usable by an entity, or the number of production or similar units expected to be obtained from the asset by an entity.