. Chapter MC, Section .10, Problem 038

Which of the following statements is CORRECT?

a. An NPV profile graph is designed to give decision makers an idea about how a project's contribution to the firm's value varies with the cost of capital.

b. The NPV profile graph for a normal project will generally have a positive (upward) slope as the life of the project increases.

c. An NPV profile graph is designed to give decision makers an idea about how a project's risk varies with its life.

d. An NPV profile graph shows how a project's payback varies as the cost of capital changes.

e. We cannot draw a project's NPV profile unless we know the appropriate cost of capital for use in evaluating the project's NPV.