Question

Which statements are INCORRECT? Check all that apply:

when IRR is positive, the project is acceptable
when profitability index is positive, the project is acceptable
a decrease in a firm's WACC will increase the attractiveness of the firm's investment options
when required return is less than internal rate of return, the project is acceptable

Answer 1

Step-by-step explanation:

The following statements are incorrect:

When IRR is positive, the project is acceptable. This is not always true. For example, a project with a positive IRR may still be unacceptable if it has a negative NPV.

When profitability index is positive, the project is acceptable. This is also not always true. For example, a project with a positive PI may still be unacceptable if it has a negative NPV.

The other two statements are correct. A decrease in a firm's WACC will increase the attractiveness of the firm's investment options, and when required return is less than internal rate of return, the project is acceptable.

Therefore, the correct answers are (A) and (B).