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Question
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 lower the cost of capital used to calculate a project's NPV, the lower the calculated NPV will be.
b. If a project's NPV is less than zero, then its IRR must be less than the cost of capital.
c. If a project's NPV is greater than zero, then its IRR must be less than zero.
d. The NPV of a relatively low-risk project should be found using a relatively high 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.
Answer
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