Projects S and L Are Equally Risky,mutually Exclusive,and Have Normal

question 39

Multiple Choice

Projects S and L are equally risky,mutually exclusive,and have normal cash flows.Project S has an IRR of 15%,while Project L's IRR is 12%.The two projects have the same NPV when the WACC is 7%.Which of the following statements is CORRECT?

• A) If the WACC is 10%,both projects will have positive NPVs.
• B) If the WACC is 6%,Project S will have the higher NPV.
• C) If the WACC is 13%,Project S will have the lower NPV.
• D) If the WACC is 10%,both projects will have a negative NPV.
• E) Project S's NPV is more sensitive to changes in WACC than Project L's.

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Definitions:

Frequency

The rate at which an event occurs or is repeated over a specific period of time, often used in statistics, communications, and media studies.

Competitive Parity

A firm’s strategy of setting prices that are similar to those of major competitors. Status Quo Pricing: A competitor-oriented strategy in which a firm changes prices only to meet those of competition.

IMC Budgeting

Involves allocating financial resources across various marketing communication channels as part of an Integrated Marketing Communications strategy.

Communication Budget

The financial allocation for all communication and promotional activities within a company, including advertising, public relations, and direct marketing.