Assume a project has normal cash flows.All else equal,which of the following statements is CORRECT?
A) A project's NPV increases as the WACC declines.
B) A project's MIRR is unaffected by changes in the WACC.
C) A project's regular payback increases as the WACC declines.
D) A project's discounted payback increases as the WACC declines.
E) A project's IRR increases as the WACC declines.

Question

Quizplus · Accepted Answer

A project's NPV is directly related to the discount rate used to calculate it, which is the WACC. As the WACC declines, the NPV increases, assuming all else equal. The MIRR, regular payback, and discounted payback are also affected by changes in the WACC, but in different ways. The IRR is not related to the WACC, and its calculation is independent of the discount rate.

Assume a Project Has Normal Cash Flows