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3. Projects A and B are mutually exclusive and h...

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3. Projects A and B are mutually exclusive and have normal cash flows. Project A has an IRR of 15% and B's IRR is 20%. The company's WACC is 12%, and at the rate Project A has the higher NPV. Which of the following statements is correct? A. The crossover rate for the two projects must be less than 12%. B. Assuming the timing pattern of the two projects' cas flow is the same, Project B probably has a higher cost (and larger scale). C. Assuming the two projects have the same scale, Project B probably has a faster payback than Project A. D. The crossover rate for the two projects must be 12%. E. Since B has a higher IRR, then it must also have a higher NPV if the crossover is less than the WACC of 12%.

 

Paper#5681 | Written in 18-Jul-2015

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