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 higher the cost of capital used to calculate the NPV, the lower the calculated NPV will be.
B) If a project's NPV is greater 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 NPVs of relatively risky projects should be found using relatively low costs of capital.
E) A project's NPV is generally found by compounding the cash inflows at the cost of capital to find the terminal value (TV), then discounting the TV at the IRR to find its PV.

Question

Quizplus · Accepted Answer

The NPV calculation involves discounting future cash flows at the cost of capital, so the higher the cost of capital, the greater the discount applied to future cash flows, resulting in a lower NPV calculation.

Which of the Following Statements Is CORRECT? Assume That the Project