Projects S and L Both Have Normal Cash Flows,and the Projects

question 55

Multiple Choice

Projects S and L both have normal cash flows,and the projects have the same risk,hence both are evaluated with the same WACC,10%.However,S has a higher IRR than L.Which of the following statements is CORRECT?

• A) Project S must have a higher NPV than Project L.
• B) If Project S has a positive NPV,Project L must also have a positive NPV.
• C) If the WACC falls,each project's IRR will increase.
• D) If the WACC increases,each project's IRR will decrease.
• E) If Projects S and L have the same NPV at the current WACC,10%,then Project L,the one with the lower IRR,would have a higher NPV if the WACC used to evaluate the projects declined.

Understand the market reactions to new equity offerings and reasons behind them.

Calculate the value of a right in a rights offering scenario.

Recognize the specific characteristics and advantages of direct private long-term debt financing.

Understand the capacity limits of different types of memory.

---

Definitions:

Scienter

A legal term that refers to knowledge of the wrongful nature of one's act or omission or the intent to deceive or defraud.

Fraud

Deliberate misleading actions taken to benefit oneself or harm another person.

Criminal Prosecution

The process by which a person is charged, tried, and possibly convicted of a crime by the government.

Civil Prosecution

A legal process initiated by a private individual or entity, not by the state, to seek remedy for a wrong.