Which of the following statements is CORRECT? Please provide your answer in the

Question

Which of the following statements is CORRECT? Please provide your answer in the rich text box. A An NPV profile graph shows how a project’s payback varies as the cost of capital changes B The NPV profile graph for a normal project will generally have a positive (upward) slope as the life of the project increases C An NPV profile graph is designed to give decision makers an idea about how a project’s risk varies with its life D An NPV profile graph is designed to give decision makers an idea about how a project’s contribution to the firm’s value varies with the cost of capital E We cannot draw a project’s NPV profile unless we know the appropriate WACC for use in evaluating the project’s NPV

Explanation / Answer

NPV profile shows the change in NPV with change in Cost of capital....I.e. what should be the acceptable Cost of capital for a given project...

.Therefore (e) is the correct statement as Designing a NPV profile will be worthless unless we know the WACC..

Please provide feedback.... Thanks in advance.. :-)

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