Westchester Corp

question 31

Multiple Choice

Westchester Corp.is considering two equally risky,mutually exclusive projects,both of which have normal cash flows.Project A has an IRR of 11%,while Project B's IRR is 14%.When the WACC is 8%,the projects have the same NPV.Given this information,which of the following statements is CORRECT?

• A) If the WACC is 13%,Project A's NPV will be higher than Project B's.
• B) If the WACC is 9%,Project A's NPV will be higher than Project B's.
• C) If the WACC is 6%,Project B's NPV will be higher than Project A's.
• D) If the WACC is greater than 14%,Project A's IRR will exceed Project B's.
• E) If the WACC is 9%,Project B's NPV will be higher than Project A's.

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Definitions:

Initial Public Offering

The first sale of stock by a private company to the public, often referred to as going public.

Business Plan

A formal document that outlines a company's goals, strategies for achieving them, and the financial forecasts associated with these strategies.

Basic Elements

The fundamental components or principles that form the essential parts of a whole.

Loan

Borrowed money that is expected to be paid back with interest.