Question
You are analysing a project that has NPV>0. You believe there is some uncertainty in the WACC estimation for this project. When calculating the project's
You are analysing a project that has NPV>0. You believe there is some uncertainty in the WACC estimation for this project. When calculating the project's IRR, you found out that it is only slightly higher than the project's estimated WACC. What should you do?
a) You should invest in the project because estimation error is not an important concern in this case b) You should invest in the project because all NPV>0 projects should be taken c) You should not invest in the project because estimation error is a concern and the fact that IRR is only slightly above the WACC makes the problem worse d) You should not invest in the project because all projects with a some uncertainty in the WACC estimation should be rejected e) You should invest in the project because both the NPV and IRR rules indicate the project is a good investment
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