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Assume That the Economy Is Enjoying a Strong Boom,and as a Result

question 6

Multiple Choice

Assume that the economy is enjoying a strong boom,and as a result interest rates and money costs generally are relatively high.The WACC for two mutually exclusive projects that are being considered is 12%.Project S has an IRR of 20% while Project L's IRR is 15%.The projects have the same NPV at the 12% current WACC.However,you believe that the economy will soon fall into a mild recession,and money costs and thus your WACC will soon decline.You also think that the projects will not be funded until the WACC has decreased,and their cash flows will not be affected by the change in economic conditions.Under these conditions,which of the following statements is CORRECT?


Definitions:

Fear Of Failure

The fear that occurs when people are afraid of looking bad in front of others.

Success Feeling

The sense of achievement or fulfillment that comes from accomplishing goals or overcoming challenges.

Criticism Fear

The anxiety or apprehension of being judged, evaluated negatively, or receiving negative feedback.

Workplace Substance Policies

Regulations set by a company to manage or prohibit the use and abuse of drugs and alcohol within the workplace environment.

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