Assuming that the project being considered has a normal cash flow, with one outf
ID: 2671031 • Letter: A
Question
Assuming that the project being considered has a normal cash flow, with one outflow followed by a series of inflows which one is correct?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.
A project’s regular IRR is found by compounding the cash flows at the WACC to find the present value (PV), the discounting the TV to find the IRR.
If a project’s IRR is smaller than the WACC, then its NPV will be positive.
A project’s IRR is the discount rate that causes the PV of the inflows to equal the project’s cost.
If a project’s IRR is positive, then its NPV must also be positive.
Explanation / Answer
A project