Assume a project has normal cash flows.All else being equal,which of the following statements is correct?
A)The project's IRR increases as the WACC declines.
B)The project's NPV increases as the WACC declines.
C)The project's MIRR is unaffected by changes in the WACC.
D)The project's regular payback increases as the WACC declines.

Question

Quizplus · Accepted Answer

When the WACC (Weighted Average Cost of Capital) declines, the discount rate used to calculate the NPV decreases, which leads to an increase in the project's NPV. The IRR (Internal Rate of Return) could stay the same or decrease with a decrease in the discount rate. MIRR (Modified Internal Rate of Return) also changes with changes in WACC. The regular payback period is also unaffected by WACC changes.

Assume a Project Has Normal Cash Flows