Which of the following statements is CORRECT? Assume that the project being considered has normal cash flows, with one o
Posted: Wed Mar 30, 2022 3:46 pm
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 NPV of a relatively risky projects should be found using
relatively low cost of capital.
e. A project's NPV is 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 it's PV.
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 NPV of a relatively risky projects should be found using
relatively low cost of capital.
e. A project's NPV is 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 it's PV.