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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Definitions:

Milgram Experiment

A psychological experiment conducted by Stanley Milgram in the 1960s to study obedience to authority, where participants were instructed to administer electric shocks to another person.

Stanford University Prison Experiment

A psychological study conducted by Philip Zimbardo in 1971 at Stanford University, where students were assigned roles of prisoners and guards to explore the effects of perceived power.

Generalization

Drawing a conclusion about a certain characteristic of a population based on a sample from it.

Logical Support

The provision of reasons or evidence to justify a claim or argument.