Project a Has an Internal Rate of Return of 18

question 21

Multiple Choice

Project A has an internal rate of return of 18 percent, while Project B has an internal rate of return of 16 percent. However, if the company's cost of capital (WACC) is 12 percent, Project B has a higher net present value. Which of the following statements is most correct?

• A) The crossover rate for the two projects is less than 12 percent.
• B) Assuming the timing of the two projects is the same, Project A is probably of larger scale than Project B.
• C) Assuming that the two projects have the same scale, Project A probably has a faster payback than Project B.
• D) Answers a and b are correct.
• E) Answers b and c are correct.

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