Question
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
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. A projects regular IRR is found by compounding the initial cost at the opportunity cost of capital to find the terminal value (TV), then discounting the TV at the opportunity cost of capital.
b. A projects regular IRR is found by compounding the cash inflows at the opportunity cost of capital to find the present value (PV), then discounting the TV to find the IRR.
c. If a projects IRR is smaller than the opportunity cost of capital, then its NPV will be positive.
d. A projects IRR is the discount rate that causes the PV of the inflows to equal the projects cost.
e. If a projects IRR is positive, then its NPV must also be positive.
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