Consider Projects S and L

question 73

Multiple Choice

Consider projects S and L.Both have normal cash flows, and the projects have the same risk, hence both are evaluated with the same cost of capital, 10%.However, S has a higher IRR than L.Which of the following statements is CORRECT?

• A) If Project S has a positive NPV, Project L must also have a positive NPV.
• B) If the cost of capital falls, each project's IRR will increase.
• C) If the cost of capital increases, each project's IRR will decrease.
• D) If Projects S and L have the same NPV at the current cost of capital, 10%, then Project L, the one with the lower IRR, would have a higher NPV if the cost of capital used to evaluate the projects declined.
• E) Project S must have a higher NPV than Project L.

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Definitions:

Narcissistic Personality Disorder

A mental disorder characterized by an inflated sense of self-importance, need for admiration, and lack of empathy for others.

Schizoid Personality Disorder

A personality disorder characterized by a long-term pattern of detachment from social relationships and a limited range of emotional expression.

Therapy Progress

The process of making positive changes and advancements through the course of psychological therapy.

Obsessive-Compulsive Personality Disorder

A personality disorder marked by such an intense focus on orderliness, perfectionism, and control that the person loses flexibility, openness, and efficiency.