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    MCQ on capital budgeting

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    2. Assume a project has normal cash flows. All else equal, which of the following statements is correct?

    a. The project's IRR increases as the WACC declines.
    b. The project's NPV increases as the WACC declines.
    c. The project's MIRR is unaffected by changes in the WACC
    d. The project's regular payback increases as the WACC declines.
    e. The project's discounted payback increases as the WACC declines.

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    Solution Preview

    Project's NPV is calculated by discounting the future cash flows and subtracting the initial investment from the discounted cash flows. The lower the discount rate for the project (WACC), higher is the sum of ...

    Solution Summary

    Discusses the answer related to project cash flows.