A company considers a new project. The required rate of return (WACC) on the pro

ID: 2713392 • Letter: A

Question

A company considers a new project. The required rate of return (WACC) on the project is 10 percent. Which of the following statement is correct?

If the project’s NPV = $1,500, the company should accept the project.

If the project’s IRR < 10 percent, the company should accept the project.

If the project’s MIRR < 10 percent, the company should accept the project.

If the project’s PI > 0, the company should accept the project.

If the project’s payback period > required cutoff payback, the company should accept the project.

If the project’s NPV < 0 and IRR > 10 percent, the company should accept the project.

If the project’s NPV = $1,500, the company should accept the project.

If the project’s IRR < 10 percent, the company should accept the project.

If the project’s MIRR < 10 percent, the company should accept the project.

If the project’s PI > 0, the company should accept the project.

If the project’s payback period > required cutoff payback, the company should accept the project.

If the project’s NPV < 0 and IRR > 10 percent, the company should accept the project.

1) accept project as NPV>0 (True)

2) Reject project as IRR is less than WACC( False)

3) Reject project as MIRR is less than WACC( False)

4) accept project if PI>1( False)

5) No, this is to be looked at in conjucation with NPV. If payback criteria is satisfied but NPV is less than 0, reject project(false)

6) This cannot happen, if IRR is > WACC, NPV has to be greater than 0,(false)

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