Which of the Following Statements Is CORRECT

question 77

Multiple Choice

Which of the following statements is CORRECT?

• A) To find the MIRR, we first compound cash flows at the regular IRR to find the TV, and then we discount the TV at the WACC to find the PV.
• B) The NPV and IRR methods both assume that cash flows can be reinvested at the WACC. However, the MIRR method assumes reinvestment at the MIRR itself.
• C) If two projects have the same cost, and if their NPV profiles cross in the upper right quadrant, then the project with the higher IRR probably has more of its cash flows coming in the later years.
• D) If two projects have the same cost, and if their NPV profiles cross in the upper right quadrant, then the project with the lower IRR probably has more of its cash flows coming in the later years.
• E) For a project with normal cash flows, any change in the WACC will change both the NPV and the IRR.

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Definitions:

Bell-Shaped Distribution

A graphical representation of data that displays a normal distribution, which appears as a symmetrical bell-shaped curve.

Random Samples

A selection method used in research to gather participants from a larger population in a way that each individual has an equal chance of being chosen.

Population Averages

Statistical measures that summarize the central tendency of a collection of data, representing the average characteristics of a population.

Standard Deviation

A statistical measure that quantifies the variation or dispersion of a set of numerical data.