Which statement about a project's IRR is correct? Assume that all projects being considered have normal cash flows and are equally risky.
A)If a project's IRR is equal to its WACC, then, under all reasonable conditions, the project's NPV must be negative.
B)If a project's IRR is equal to its WACC, then, under all reasonable conditions, the project's IRR must be negative.
C)If a project's IRR is equal to its WACC, then, under all reasonable conditions, the project's NPV must be zero.
D)There is no necessary relationship between a project's IRR, its WACC, and its NPV.

Question

Quizplus · Accepted Answer

If a project's Internal Rate of Return (IRR) is equal to its Weighted Average Cost of Capital (WACC), the Net Present Value (NPV) of the project is zero. This is because the IRR is the discount rate that makes the NPV of all cash flows from a particular project equal to zero.

Which Statement About a Project's IRR Is Correct? Assume That