Project X's IRR Is 19% and Project Y's IRR Is

question 79

Multiple Choice

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

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Definitions:

Tax

Compulsory financial charges or other types of levies imposed upon a taxpayer by a governmental organization in order to fund government spending and various public expenditures.

Producer Surplus

The difference between what producers are willing to accept for a good or service and the higher price they actually receive, representing the benefit to producers.

Tax

A tax represents an obligatory monetary fee or different kind of charge applied to a taxpayer by a government entity, intended to finance government operations and a range of public spending.

Sellers Receive

Refers to the revenue or payment that sellers get in exchange for providing goods or services in a market.