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

question 76

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 cost of capital 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 cost of capital.
• 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 costs of capital.
• E) A project's NPV is generally found by compounding the cash inflows at the cost of capital to find the terminal value (TV), then discounting the TV at the IRR to find its PV.

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Definitions:

Financially Attractive

A term used to describe investments or opportunities that are likely to provide a good financial return.

Internal Rate

Often refers to the internal rate of return (IRR), which is a discount rate that makes the net present value of all cash flows from a particular project equal to zero.

Return

The amount of profit or loss gained from an investment relative to its initial cost.

Project A

Not a definitive key term without additional context; it likely refers to a specific, named project within a given context. NO.