Which of the following statements is CORRECT? a. If the cost of capital is...
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Finance
Which of the following statements is CORRECT?
a. If the cost of capital is less than the crossover rate, then the IRR and the NPV criteria will not result in a conflict between the projects. One project will rank higher by both criteria. (HINT: Ch11 Slide 23. What condition leads to conflicts between IRR and NPV?)
b. If a projects NPV is greater than zero, then its IRR must be less than the WACC.
c. A projects MIRR is unaffected by changes in the WACC if cash inflows are compounded at the WACC to find the terminal value.
d. If the IRR of normal Project X is greater that the IRR of mutually exclusive (and also normal) Project Y, we cannot conclude that the firm should always select X rather than Y if X had NPV>0.
e. The IRR assumes reinvestment at the IRR, and that is generally not as valid as assuming reinvestment at the WACC, which is the reinvestment rate assumption of the NPV method.
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