A Project Has Normal Cash Flows

question 83

Multiple Choice

A project has normal cash flows. Its IRR is 15 percent and its cost of capital is 10 percent. Which of the following statements is incorrect?

• A) The project has only one negative cash flow.
• B) The project's MIRR is less than 15 percent but greater than 10 percent.
• C) The project's discounted payback is less than the project's payback.
• D) The project's NPV > 0.

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Definitions:

Par Value

The face value of a bond or stock, as stated by the issuing company, which does not necessarily reflect market value.

Annual Dividend

The total dividend payment a shareholder receives from a company in one year.

Debt-Equity Ratio

A gauge illustrating the mix between shareholder equity and debt in a company’s asset-financing strategy.

Weighted Average Cost of Capital

A calculation of a firm's cost of capital in which each category of capital is proportionately weighted, reflecting the expected cost of all available funding sources.