Which of the following statements is CORRECT? Assume that the project being cons

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.

Select the correct answer.

If Project A has a higher IRR than Project B, then Project A must also have a higher NPV. If Project A has a higher IRR than Project B, then Project A must have the lower NPV. If a project has normal cash flows and its IRR exceeds its WACC, then the project's NPV must be positive. The IRR calculation implicitly assumes that cash flows are withdrawn from the business rather than being reinvested in the business. The IRR calculation implicitly assumes that all cash flows are reinvested at the WACC.

Explanation / Answer

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.

If a project has normal cash flows and its IRR exceeds its WACC, then the project's NPV must be positive.

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