2. Which of the following statements is CORRECT? Assume that the project being considerod has normal cash lows, with one outflow followed by a series of inflows a. 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 b. The lower the WACC used to calculate it, the lower the calculated NPV will be. c. If a project's NPV is less than zero, then its IRR must be less than the WACC d. If a project's NPV is greater than zero, then its IRR must be less than zero. e. The NPV of a relatively low-risk project should be found using a relatively high WACC. Which of the following statements is CORRECT? a. One defect of the IRR method is that it does not take account of cash flows over a project's full life. b. One defect of the IRR method is that it does not take account of the time value of moncy c. One defect of the IRR method is that it does not take account of the cost of capital. d. One defect of the IRR method is that it values a dollar received today the same as a dollar that will not 13. be received until sometime in the future. c. One defect of the IRR method is that it assumes that the cash flows to be received from a project can be reinvested at the IRR itself, and that assamption is often not valid. Which of the following statements is CORRECT? a. The shorter a project's payback period, the less desirable the project is normally considered to be by this criterion 14. b. One drawback of the payback criterion is that this mcthod does not take account of cash flows beyond the payback period c. If a project's payback is positive, then the project should be accepted because it must have a positive NPV d. The regular payback ignores cash flows beyond the payback period, but the discounted payback method overcomes problem. e One drawback of the discounted payhack is that this mcthod does not consider the time valuc of money, whilc the regular payback overcomes this drawback. 15. Assume a project has normal cash flows. All else equal, which of the following statements is CORRECT? a. A project's IRR increases as the WACC declines. b. A project's NPV increases as the WACC declines. c. A project's MIRR is unaffected by changes in the WACC d. A project's regular payback increases as the WACC declines. e. A project's discounted payback increases as the WACC declines. 16. Which of the following statements is CORRECT? a. The internal rate of return method (IRR) is generally regarded by academics as being the best single method for evaluating capital budgeting projects