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.
Group of answer choices
The lower the cost of capital used to calculate a project's NPV, the lower the calculated NPV will be.
If a project's NPV is less than zero, then its IRR must be less than the cost of capital.
If a project's NPV is greater than zero, then its IRR must be less than zero.
The NPV of a relatively low-risk project should be found using a relatively high cost of capital.
Option B is correct
If a project's NPV is less than zero, then its IRR must be less than the cost of capital. The statement is correct. On the other hand, if a project's NPV is greater than zero, then its IRR must be greater than the cost of capital.
Option A is incorrect because The lower the cost of capital used to calculate a project's NPV, the higher the calculated NPV will be.
Option C is incorrect because If a project's NPV is greater than zero, then its IRR must be more than zero.
Option D is incorrect because The NPV of a relatively low-risk project should be found using a relatively low cost of capital.
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