Project X Has an Internal Rate of Return of 20

question 18

Multiple Choice

Project X has an internal rate of return of 20 percent. Project Y has an internal rate of return of 15 percent. Both projects have a positive net present value. Which of the following statements is most correct?

• A) Project X must have a higher net present value than Project Y.
• B) If the two projects have the same WACC, Project X must have a higher net present value.
• C) Project X must have a shorter payback than Project Y.
• D) Both answers b and c are correct.
• E) None of the above answers is correct.

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Definitions:

Debenture Bonds

A type of debt instrument that is not secured by physical assets or collateral but is backed only by the issuer's creditworthiness and reputation.

General Credit

A broad term that can refer to the creditworthiness of a business or the general ability to borrow money through financial instruments.

Market Interest Rate

The rate of interest prevailing in the market for securities, affecting the cost of borrowing or the return on investments.

Stated Rate

The interest rate expressed in the terms of a loan or investment agreement, not including the effects of compounding.