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

question 56

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 also have a higher npv.
• B) the irr calculation implicitly assumes that all cash flows are reinvested at the cost of capital.
• C) the irr calculation implicitly assumes that cash flows are withdrawn from the business rather than being reinvested in the business.
• D) if a project has normal cash flows and its irr exceeds its cost of capital, then the project's npv must be positive.
• E) if project a has a higher irr than project b, then project a must have the lower npv.

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Definitions:

FIFO Perpetual

An accounting method where goods are sold based on the order they were purchased or produced; "FIFO" stands for "first in, first out," and "perpetual" means the inventory records are updated continuously.