Project X's IRR Is 19% and Project Y's IRR Is

question 16

Multiple Choice

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 WACC is 10%,Project Y has a higher NPV than X.Given this information,which of the following statements is correct?

• A)The crossover rate between the two projects must be less than 10%.
• B)The crossover rate between the two projects must be greater than 10%.
• C)If the WACC is 8%, Project X will have the higher NPV.
• D)If the WACC is 18%, Project Y will have the higher NPV.

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Definitions:

Tax Considerations

The implications of tax laws and regulations on financial decisions and transactions.

Reverse Stock Split

A corporate action where a company reduces the number of its existing shares to increase the per-share price, consolidating the shares at a specified ratio (e.g., 1 for 10), without changing the company's market capitalization.

Transaction Costs

Expenses incurred when buying or selling a good or service, which may include broker fees, commissions, and other charges.

PE Ratio

The price-to-earnings ratio, a valuation metric that compares a company's stock price to its earnings per share.