Which of the following statements is CORRECT?
A. An NPV profile graph shows how a project's payback varies as the cost of capital changes.
B. The NPV profile graph for a normal project will generally have a positive (upward) slope as the life of the project increases.
C. An NPV profile graph is designed to give decision makers an idea about how a project's risk varies with its life.
D. An NPV profile graph is designed to give decision makers an idea about how a project's contribution to the firm's value varies with the cost of capital.
E. We cannot draw a project's NPV profile unless we know the appropriate WACC for use in evaluating the project's NPV.
Answer: D
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