Assume a Project Has Normal Cash Flows

question 23

Multiple Choice

Assume a project has normal cash flows.All else equal,which of the following statements is CORRECT?

• A) A project's NPV increases as the WACC declines.
• B) A project's MIRR is unaffected by changes in the WACC.
• C) A project's regular payback increases as the WACC declines.
• D) A project's discounted payback increases as the WACC declines.
• E) A project's IRR increases as the WACC declines.

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Definitions:

Depletion Rate

The rate at which natural resources, such as minerals or timber, are consumed or utilized, often used in calculating depreciation for accounting purposes.

Depletion Expense

A depletion expense is an accounting approach to allocate the cost of naturally occurring resources, such as minerals, oil, or timber, over their productive life as they are consumed or sold.

Mineral Rights

Legal entitlements associated with the ownership or leasing of the mineral resources beneath a piece of land, including the rights to explore, extract, and sell those minerals.

Straight-Line Method

A method of calculating depreciation of an asset, where the asset's cost is evenly distributed over its useful life.