Multiple choice
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1. A project has an up-front cost of $100,000. The project's WACC is 12 percent and its net present value iss $10,000. Which of the following statements is most correct?
a. The project should be rejected since its return is less than the WACC.
b. The project's internal rate of return is greater than 12 percent.
c. The project's modified internal rate of return is less than 12 percent
d. All of the above answers are correct.
e. None of the above answers is correct.
2. Assume a project has normal cash flows. All else equal, which of the following statements is correct?
The project's IRR increasess as the WACC declines.
The project's NPV increases as the WACC declines.
The project's MIRR is unaffected by changes in the WACC
The project's regular payback increases as the WACC declines.
The project's discounted payback increses as the WACC declines.
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Solution Summary
The solution explains two multiple choice questions relating to WACC and cash flows
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1. b. The project's internal rate of return is greater than 12 percent.
a. is not correct since the NPV is postive so return would greater than WACC
b. Is correct. At WACC = 12%, the ...
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