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.
A) The lower the WACC used to calculate a project's NPV, the lower the calculated NPV will be.
B) If a project's NPV is less than zero, then its IRR must be less than the WACC.
C) If a project's NPV is greater than zero, then its IRR must be less than zero.
D) The NPV of a relatively low-risk project should be found using a relatively high WACC.
E) A project's NPV is found by compounding the cash inflows at the IRR to find the terminal value (TV), then discounting the TV at the WACC.

Question

Quizplus · Accepted Answer

If a project's NPV is less than zero, it means that the project is not generating returns over the required rate of return (WACC), so it cannot have an IRR greater than or equal to the WACC. Therefore, the IRR must be less than the WACC.

Which of the Following Statements Is CORRECT? Assume That the Project