QUESTION 2 Which of the following statements is CORRECT? 0 a If a project with n
ID: 2794956 • Letter: Q
Question
QUESTION 2 Which of the following statements is CORRECT? 0 a If a project with normal cash flows has an IRR less than the WACC, the project must have a positive NPV O b. A project's MIRR can never exceed its IRR. O C. If the NPV is negative, the IRR must also be negative. O d If a project with normal cash flows has an IRR greater than the WACC, the project must also have a positive NPV O e If Project A's IRR exceeds Project B's, then A must have the higher NPV. QUESTION 3 Ingram Electric Products is considering a project that has the following cash flow and WACC data. What is the project's MIRR? Note that a project's projected MIRR can be less than the WACC (and even negative), in which case it will be rejected. WACC 7.00% ear Cash flows $S00 S350 $350 S350 a. 9.15% b. 13.97% O c. 12.04% d. 14.93% O e 10.00%Explanation / Answer
Net present value is present value of cash inflows less Present Value of cash outflows. Present values will be determined using firms cost of capital (WACC). IRR assumes cash flows are discounted at IRR.
If IRR is more than WACC NPV will be positive.
Correct Answer D