Question

16. If a company's WACC is 10%, which of the following projects will be accepted? Select all that apply:

IRR = 8%

MIRR = 12%

NPV = $100,000

MIRR = 9%

14. As interest rates go up, which of the following is true? Select all that apply:

	Bond Prices go down.
	The NPV of a project goes down.
	The NPV of a project goes up.
	The NPV of a short term project goes down quicker than the NPV of a long term project.

Answer 1

(16) Company's WACC = Cost of Capital = 10 %, IRR = 8 %, An IRR lower than the cost of capital is value erosive in nature, thereby being unacceptable. MIRR of 12 % entails that it is greater than the firm's cost of capital of 10 %(WACC) thereby being value accretive in nature. Hence, this project should be accepted. A positive NPV of $ 10000 is favourable and hence this project too should be accepted.

NOTE: Please raise separate queries for the solution to the remaining unrelated question.