What Decision Should Be Made on a Project with Above-Average

question 11

Multiple Choice

What decision should be made on a project with above-average market risk?

• A) Accept if the cash flows discounted at the WACC have a positive NPV.
• B) Discount the cash flows at the IRR and accept if NPV is positive.
• C) Accept if the IRR is greater than the WACC.
• D) Use a higher discount rate than the WACC to reflect the project's risk and accept if NPV is positive at this higher discount rate.