Projects C and D Are Mutually Exclusive and Have Normal

question 53

Multiple Choice

Projects C and D are mutually exclusive and have normal cash flows.Project C has a higher NPV if the WACC is less than 12%,whereas Project D has a higher NPV if the WACC exceeds 12%.Which of the following statements is CORRECT?

• A) Project D probably has a higher IRR.
• B) Project D is probably larger in scale than Project C.
• C) Project C probably has a faster payback.
• D) Project C probably has a higher IRR.
• E) The crossover rate between the two projects is below 12%.

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Definitions:

Short-Term Debt

Borrowings and obligations payable within one year, often used to meet immediate financing needs or manage cash flow efficiently.

Long-Term Debt

Borrowings and financial obligations that are due for repayment in more than one year, indicating a company's leverage.

Fixed Assets Management

Fixed assets management involves the accounting and management practices related to the selection, maintenance, inspection, and disposal of fixed assets to maximize their efficiency and value to the business.

Cash Conversion

The process of turning physical goods, services, or other assets into cash, often measuring the efficiency of a company in generating revenue.