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

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TomShelby TomShelby · Answer 1 · 2019-08-29T04:47:25+02:00

Answer:

d. A project's IRR is the discount rate that causes the PV of the inflows to equal the project's cost

When the present values of the inflow are equal to the cost, then NPV is zero, which is exactly the goal of the IRR. This statement is true

Explanation:

The internal rate of retrn is the rate at which an investment project NPV equals to zero.

e. If a project's IRR is positive, then its NPV must also be positive.

FALSE. the IRR generates a NPV equal to zero.

a/b/c there is no relationship between the IRR and the WACC