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

question 6

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) A project's regular IRR is found by compounding the cash inflows at the cost of capital to find the present value (PV), then discounting the TV to find the IRR.
• B) If a project's IRR is smaller than the cost of capital, then its NPV will be positive.
• C) A project's IRR is the discount rate that causes the PV of the inflows to equal the project's cost.
• D) If a project's IRR is positive, then its NPV must also be positive.
• E) A project's regular IRR is found by compounding the initial cost at the cost of capital to find the terminal value (TV), then discounting the TV at the cost of capital.

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Definitions:

Public Goods

Goods that are neither excludable nor rival in consumption.

Private Goods

Goods that are both excludable and rival in consumption.

Industrial Machinery

Machines and equipment designed and used in the manufacturing and production sector.

Factor Of Production

Resources utilized in the creation of goods and services, including land, labor, capital, and entrepreneurship.