Assume a project has normal cash flows. All else equal, which of the following statements is CORRECT? a. A project's NPV increases as the cost of capital declines. b. A project's MIRR is unaffected by changes in the cost of capital. c. A project's regular payback increases as the cost of capital declines. d. A project's discounted payback increases as the cost of capital declines. e. A project's IRR increases as the cost of capital declines.

Assume a project has normal cash flows. All else equal, which of the following statements is CORRECT? a. A project's NPV increases as the cost of capital declines. b. A project's MIRR is unaffected by changes in the cost of capital. c. A project's regular payback increases as the cost of capital declines. d. A project's discounted payback increases as the cost of capital declines. e. A project's IRR increases as the cost of capital declines.

Corporate Fin Focused Approach

5th Edition

ISBN:9781285660516

Author:EHRHARDT

Publisher:EHRHARDT

Chapter11: Cash Flow Estimation And Risk Analysis

Section11.1: Identifying Relevant Cash Flows

Problem 3ST

See similar textbooks

Similar questions

Assume a project has normal cash flows. All else equal, which of the following statements is CORRECT? A. A project's IRR increases as the WACC declines. B. A project's MIRR is unaffected by changes in the WACC. C. A project's regular payback increases as the WACC declines. D. A project's discounted payback increases as the WACC declines. E. A project's NPV increases as the WACC declines.
Assume a project has normal cash flows (i.e. the initial cash flow is negative and all other cash flows are positive). Which of the following statements is most correct? All else equal, a project’s IRR increases as the cost of capital declines. All else equal, a project’s NPV increases as the cost of capital declines. All else equal, a project’s MIRR is unaffected by changes in the cost of capital. None of the above
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. If Project A has a higher IRR than Project B, then Project A must also have a higher NPV. b. If a project has normal cash flows and its IRR exceeds its cost of capital, then the project's NPV must be positive. c. The IRR calculation implicitly assumes that all cash flows are reinvested at the cost of capital. d. If Project A has a higher IRR than Project B, then Project A must have the lower NPV. e. The IRR calculation implicitly assumes that cash flows are withdrawn from the business rather than being reinvested in the business.
Which of the following statements is most correct? If a project’s internal rate of return (IRR) exceeds the cost of capital, then the project’s net present value (NPV) must be positive. If Project A has a higher IRR than Project B, then Project A must also have a higher NPV. The IRR calculation implicitly assumes that all cash flows are reinvested at a rate of return equal to the cost of capital. Answers a and c are correct. None of the answers above are correct.
What refers to the interest rate at which the present work of the cash flow on a project is zero of the interest earned by an investment? Select one: a. Return of investment b. Yield c. Rate of return d. Economic return
Which of the following statements is true about the internal rate of return? a. It is the interest rate that sets a project's net present value at zero. b. It is the minimal acceptable interest rate on an investment. c. It is the difference between the present value of the cash inflows and outflows associated with a project. d. It is the difference between the present value of a cash outflow and the depreciation associated with an asset.
Assume a project has normal cash flows. All else equal, which of the following statements is correct? A project's regular payback increases as the WACC declines. OA project's IRR increases as the WACC declines. A project's NPV declines as the WACC declines. 4 A project's discounted payback increases as the WACC declines. O A project's MIRR is unaffected by changes in the WACC. None of the above statement.
which of the following statement is true>? 1. return on equity is the ratio of total assets to total net income 2. one must know the discount rate to compute the npv of a project but one can compute the IRR without referring to the discount rate. 3. there will always be one IRR regardless of cash flows 4. one must know the discount rate to compute the IRR of a project but one can compute the NPV without referring to the discount rate 5. payback accounts for time value of money
A project's IRR: A) All of these answers are correct. B is the average rate of return necessary to pay back the project's capital providers. C is equal to the discounted cash flows divided by the number of cash flows if the cash flows are a perpetuity. D will change with the cost of capital.
Assume that both Projects A and B have normal cash flows, with one outflow followed by a series of inflows. Which of the following statements is CORRECT? a. If Project A's IRR exceeds its cost of capital, then the project A's NPV must be positive. b. The IRR calculation implicitly assumes that all cash flows are reinvested at the cost of capital. c. If Project A has a higher IRR than Project B, then Project A must have the lower NPV. d. If Project A has a higher IRR than Project B, then Project A must also have a higher NPV. e. If Project A has a lower IRR than Project B, then Project A must also have a lower NPV.
Which of the following statements is CORRECT? a. If a project with normal cash flows has an IRR greater than the cost of capital, the project must also have a positive NPV. b. If a project with normal cash flows has an IRR less than the cost of capital, the project must have a positive NPV. c. If the NPV is negative, the IRR must also be negative. d. A project's MIRR can never exceed its IRR. e. If Project A's IRR exceeds Project B's, then A must have the higher NPV.
You have determined the profitability of a planned project by finding the present value of all the cash flows from that project. Which of the following would cause the project to look more appealing in terms of the present value of those cash flows? A. The discount rate increases. B. The cash flows are extended over a longer period of time, but the total amount of the cash flows remains the same. C. The discount rate decreases. D. Answers B and C above. E. Answers A and B above.