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.The lower the WACC used to calculate a project's NPV, the lower the calculated NPV will be.If a project's NPV is less than zero, then its IRR must be less than the WACC.If a project's NPV is greater than zero, then its IRR must be less than zero.The NPV of a relatively low-risk project should be found using a relatively high WACC.A project's NPV is found by compounding the cash inflows at the IRR to find the terminal value (TV), then discounting the TV at the WACC.000o

NPV of a project is calculated by discounting the cash flows & subtracting the amount from the…

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ninal

Essentials Of Investments

11th Edition

ISBN:9781260013924

Author:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.

Publisher:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.

Chapter1: Investments: Background And Issues

Section: Chapter Questions

Problem 1PS

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Question

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.
The lower the WACC used to calculate a project's NPV, the lower the calculated NPV will be.
If a project's NPV is less than zero, then its IRR must be less than the WACC.
If a project's NPV is greater than zero, then its IRR must be less than zero.
The NPV of a relatively low-risk project should be found using a relatively high WACC.
A project's NPV is found by compounding the cash inflows at the IRR to find the terminal value (TV), then discounting the TV at the WACC.
000o

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