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)A project's regular IRR is found by compounding the initial cost at the WACC to find the terminal value (TV), then discounting the TV at the WACC.
B)A project's regular IRR is found by compounding the cash inflows at the WACC to find the present value (PV), then discounting to find the IRR.
C)If a project's IRR is smaller than the WACC, then its NPV will be positive.
D)A project's IRR is the discount rate that causes the PV of the inflows to equal the project's cost.

Question

Quizplus · Accepted Answer

The IRR is the discount rate at which the project's cash inflows equal the initial outflow, so the PV of the inflows minus the initial outflow is zero. Therefore, the IRR is the discount rate that causes the PV of the inflows to equal the initial cost.

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