Question 5: Which of the following statements is CORRECT? Assume that the projec

Question

Question 5: 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. (6 points) terminalvalusTlthen dissounting this TV atthe WACC shsb-vs e WANE ii the B) A project's regular IRR is found by discounting the cash inflows at the WACC to find the present value (PV), then compounding this PV to find the IRR (C) If a project's IRR is greater than the WACC, then its NPV must be negative (D) To find a project's IRR, we must solve for the discount rate that causes the PV of the inflows to equal the PV of the project's costs To find a project's IRR, we must find a discount rate that is equal to the WACC (E) Question 6: 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. (6 points) A) The longer a project's payback period, the more desirable the project is normally considered to be by this criterion (B) One drawback of the payback criterion for evaluating projects is that this method does not properly account for the time value of money (C) If a project's payback is positive, then the project should be rejected because it must have a negative NPV (D) The regular payback ignores cash flows beyond the payback period, but the discounted payback method overcomes this problem (E) If a company uses the same payback requirement to evaluate all projects, say it requires a payback of 4 years or less, then the company will tend to reject projects with relatively short lives and accept long-lived projects, and this will cause its risk to increase over time

Explanation / Answer

Question 5

(D) is the answer

Because at this level NPV will be zero

Question 6

(C) .If a project's payback is positive, then the project should be rejected because it must have a negative NPV.

the above is the answer

Related Questions

Navigate

• Browse (All)
• Browse Q
• Subjects

---

---

Integrity-first tutoring: explanations and feedback only — we do not complete graded work. Learn more.