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.

Question

Quizplus · Accepted Answer

The internal rate of return (IRR) is the discount rate that sets the present value of the cash inflows equal to the initial cost of a project. Therefore, statement C is correct. Statement A is incorrect because regular IRR is found by setting the PV of the cash inflows equal to the initial cost and solving for the IRR. Statement B is incorrect because if a project's IRR is smaller than the WACC, its NPV will be negative. Statement D is incorrect because a project can have a positive IRR and a negative NPV if the IRR is less than the WACC. Statement E is incorrect because regular IRR is found by setting the PV of the cash inflows equal to the initial cost and solving for the IRR; there is no need to calculate a terminal value.

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