A project has an up-front cost of $100,000. The project's WACC is 12 percent and its net present value is $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.

Question

Quizplus · Accepted Answer

The net present value of the project is positive, which indicates that the project will generate a return greater than the WACC. Therefore, the project should be accepted. Additionally, since the net present value is positive, the project's internal rate of return must be greater than the WACC. The modified internal rate of return is not relevant in this case.

A Project Has an Up-Front Cost of $100,000