Projects C and D Both Have Normal Cash Flows and Are

question 1

Multiple Choice

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

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

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Marginal Tax Rate

The tax rate on an additional dollar of income, which can increase as the taxpayer's income grows.

Tax Rate

The percentage at which an individual or corporation is taxed on their income or profits.

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