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.

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27-04-2022
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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.

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gauravsingh23VT gauravsingh23VT · Answer 1 · 2022-05-09T10:58:07+02:00

If a project's NPV is less than zero, then its IRR must be less than the WACC is correct in the project being considered has normal cash flows, with one outflow followed by a series of inflows.

What is normal cash flow?

The normal cash flow stream consists of an initial investment outlay followed by positive net cash flow throughout the project's life cycle.

It's also known as a traditional cash flow stream. In a traditional cash flow stream, cash flows only change direction once.

Thus, if project is NPV is less than zero IRR is less then WACC

For more details about normal cash flow, click here

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