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:

Prevalence

The measure of the proportion of a population found to have a condition (typically a disease or disorder) at a specific time.

Cognitive-behavioral Therapy

A therapeutic approach that aims to change negative patterns of thinking or behavior that contribute to individuals' psychological distress.

Pessimism

An inclination to focus on the most negative aspects or to anticipate unfavorable outcomes, showing a deficiency in hopefulness or trust in what the future holds.