Which of the following statements is CORRECT? Assume that all projects being con
ID: 2688239 • Letter: W
Question
Which of the following statements is CORRECT? Assume that all projects being considered have normal cash flows and are equally risky. a. If a projects IRR is equal to its WACC, then, under all reasonable conditions, the projects NPV must be negative. b. If a projects IRR is equal to its WACC, then under all reasonable conditions, the projects IRR must be negative. c. If a projects IRR is equal to its WACC, then under all reasonable conditions the projects NPV must be zero. d. There is no necessary relationship between a projects IRR, its WACC, and its NPV. e. When evaluating mutually exclusive projects, those projects with relatively long lives will tend to have relatively high NPVs when the cost of capital is relatively high.Explanation / Answer
a. If a projects IRR is equal to its WACC, then, under all reasonable conditions, the projects NPV must be negative.
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