Which statement about a project’s IRR is correct? Assume that all projects being considered have normal cash flows and are equally risky.
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If a project’s IRR is equal to its WACC, then under all reasonable conditions the project’s NPV must be zero.
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If a project’s IRR is equal to its WACC, then, under all reasonable conditions, the project’s IRR must be negative.
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If a project’s IRR is equal to its WACC, then under all reasonable conditions the project’s NPV must be negative.
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When evaluating mutually exclusive projects, those projects with relatively short lives will tend to have relatively low NPVs when the cost of capital is relatively low.