Consider Two Projects, X and Y

question 9

Multiple Choice

Consider two projects, X and Y.Project X's IRR is 19% and Project Y's IRR is 17%.The projects have the same risk and the same lives, and each has constant cash flows during each year of their lives.If the cost of capital is 10%, Project Y has a higher NPV than X.Given this information, which of the following statements is CORRECT?

• A) The crossover rate must be greater than 10%.
• B) If the cost of capital is 8%, Project X will have the higher NPV.
• C) If the cost of capital is 18%, Project Y will have the higher NPV.
• D) Project X is larger in the sense that it has the higher initial cost.
• E) The crossover rate must be less than 10%.

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