Question 1: Assume a project has normal cash flows. All else equal, which of the following statements is correct?
- The projects IRR increases as the WACC declines
- The projects NPV increases as the WACC declines
- The projects MIRR is unaffected by changes in WACC
- The projects regular payback increases as the WACC declines
- The projects discounted payback increases as the WACC declines
Question 2: The regular payback method has a number of disadvantages, some of which are listed below, Which of these items is not a disadvantage of this method?
- lack of objective,market determined benchmark for making decisions
- Ignores cash flows beyond the payback period
- Does not directly account for the time value of money
- Does not provide any indication regarding a projects liquidity
- Does not directly account for differences in risk among projects