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

question 96

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)The higher the WACC used to calculate the NPV, the lower the calculated NPV will be.
• B)If a project's NPV is greater than zero, then its IRR must be less than the WACC.
• C)If a project's NPV is greater than zero, then its IRR must be less than zero.
• D)The NPVs of relatively risky projects should be found using relatively low WACCs.

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Definitions:

Financial Management

The strategic planning, organizing, directing, and controlling of financial undertakings in an organization or an institution; it also includes applying management principles to the financial assets of an organization.

Third-Party

An entity or individual not directly involved in a transaction or agreement but who may be affected by it or have an interest in it.

Honoring Checks

The act of accepting a check as payment and processing it as directed by the terms written on the check.

Drawer-Depositor

An individual or entity that has the authority to write and deposit checks within a banking relationship.