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 higher the WACC used to calculate the NPV, the lower the calculated NPV will be.
B) If a project's NPV is greater 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 NPVs of relatively risky projects should be found using relatively low WACCs.
E) A project's NPV is generally found by compounding the cash inflows at the WACC to find the terminal value (TV), then discounting the TV at the IRR to find its PV.

Question

Quizplus · Accepted Answer

The higher the WACC used to calculate the NPV, the higher the discount rate applied to future cash flows, resulting in lower present value of those cash flows and thus, a lower calculated NPV.

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