Question: 4. Chapter MC, Section .10, Problem 008 Which of the following statements is CORRECT? Assume that the project being considered has normal cash flows, with

4. Chapter MC, Section .10, Problem 008

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. The NPV of a relatively low-risk project should be found using a relatively high cost of capital.

b. The lower the cost of capital used to calculate a project's NPV, the lower the calculated NPV will be.

c. If a project's NPV is greater than zero, then its IRR must be less than zero.

d. If a project's NPV is less than zero, then its IRR must be less than the cost of capital.

e. A project's NPV is found by compounding the cash inflows at the IRR to find the terminal value (TV), then discounting the TV at the cost of capital.

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