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

question 55

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)If Project A has a higher IRR than Project B, then Project A must have the lower NPV.
• B)If Project A has a higher IRR than Project B, then Project A must also have a higher NPV.
• C)The IRR calculation implicitly assumes that all cash flows are reinvested at the WACC.
• D)If a project has normal cash flows and its IRR exceeds its WACC, then the project's NPV must be positive.

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Definitions:

Consumer Behavior

The study of how individuals, groups, and organizations select, buy, use, and dispose of goods, services, ideas, or experiences.

Assumptions

Pre-established beliefs or statements taken as true without proof, used as foundational elements in theories, models, and analyses to simplify complex realities.

Indifference Map

A graphical representation of different combinations of goods between which a consumer is indifferent, showing levels of utility.

Budget Line

A budget line represents the combinations of two goods that a consumer can purchase with a specific budget, given the prices of those goods.