Consider Two Projects, X and Y

question 9

Multiple Choice

Consider two projects, X and Y.Project X's IRR is 19% and Project Y's IRR is 17%.The projects have the same risk and the same lives, and each has constant cash flows during each year of their lives.If the cost of capital is 10%, Project Y has a higher NPV than X.Given this information, which of the following statements is CORRECT?

• A) The crossover rate must be greater than 10%.
• B) If the cost of capital is 8%, Project X will have the higher NPV.
• C) If the cost of capital is 18%, Project Y will have the higher NPV.
• D) Project X is larger in the sense that it has the higher initial cost.
• E) The crossover rate must be less than 10%.

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Definitions:

Deductive

A logical process wherein a conclusion is based on the concordance of multiple premises that are generally assumed to be true.

Ideological Reasoning

The practice of interpreting or justifying events, decisions, or actions based on a set of beliefs or ideological principles.

Critical Thinker

A person who actively questions assumptions, evaluates evidence, and assesses conclusions logically.

Ideological Beliefs

Strongly held systems of ideas and ideals, especially those that form the basis of economic or political theories and policies.