Which of the following statements is CORRECT? Assume that the project being considered has normal cash flows, with one cash outflow at t = o followed by a series of positive cash flows. a. To find a project's MIRR, we compound cash inflows at the regular IRR and then find the discount rate that causes the PV of the terminal value to equal the initial cost. Ob. To find a project's MIRR, the textbook procedure compounds cash inflows at the WACC and then finds the discount rate that causes the PV of the terminal value to equal the initial cost. c. A project's MIRR is always greater than its regular IRR. Od. If a project's IRR is greater than its WACC, then its MIRR will be greater than the IRR. e. A project's MIRR is always less than its regular IRR.

Essentials Of Investments
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ISBN:9781260013924
Author:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Publisher:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Chapter1: Investments: Background And Issues
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**Question:**

Which of the following statements is CORRECT? Assume that the project being considered has normal cash flows, with one cash outflow at t = 0 followed by a series of positive cash flows.

**Options:**

a. To find a project's MIRR, we compound cash inflows at the regular IRR and then find the discount rate that causes the PV of the terminal value to equal the initial cost.

b. To find a project's MIRR, the textbook procedure compounds cash inflows at the WACC and then finds the discount rate that causes the PV of the terminal value to equal the initial cost.

c. A project's MIRR is always greater than its regular IRR.

d. If a project's IRR is greater than its WACC, then its MIRR will be greater than the IRR.

e. A project's MIRR is always less than its regular IRR.
Transcribed Image Text:**Question:** Which of the following statements is CORRECT? Assume that the project being considered has normal cash flows, with one cash outflow at t = 0 followed by a series of positive cash flows. **Options:** a. To find a project's MIRR, we compound cash inflows at the regular IRR and then find the discount rate that causes the PV of the terminal value to equal the initial cost. b. To find a project's MIRR, the textbook procedure compounds cash inflows at the WACC and then finds the discount rate that causes the PV of the terminal value to equal the initial cost. c. A project's MIRR is always greater than its regular IRR. d. If a project's IRR is greater than its WACC, then its MIRR will be greater than the IRR. e. A project's MIRR is always less than its regular IRR.
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