A Proposed Project Has a Positive NPV When Evaluated at the Company

question 96

Multiple Choice

A proposed project has a positive NPV when evaluated at the company cost of capital.If the firm employs debt in its capital structure, will the project remain acceptable after evaluation with the WACC?

• A)Yes, using the WACC will increase the NPV.
• B)No, using the WACC will decrease the NPV.
• C)the project may now become unacceptable.
• D)there will be no change in the project's NPV.

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Definitions:

Documenting

The process of creating records for events, processes, or transactions to provide evidence or maintain a history.

Testing

The process of evaluating the functionality, performance, reliability, and security of a product or system through systematic experiments and assessments.

Financial Forecast

Projections of a company's future revenue, expenses, and profitability, used to estimate economic performance and plan business strategies.

Formal Business Plan

A detailed document that outlines a company's objectives, strategies, market analysis, financial forecasts, and management structure required for starting and running the business.