Projects S and L Both Have Normal Cash Flows,and the Projects

question 55

Multiple Choice

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

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

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Definitions:

Labour Market Shelter

Employment sectors or positions that are somewhat protected from the usual pressures and instabilities of the broader labor market, often due to unionization or government policies.

Canadian Medical Association

A national, voluntary association of physicians that advocates on behalf of its members and the public for access to high-quality health care, and provides leadership and guidance to physicians.

Multinational Corporation

A large company that operates and provides goods or services in multiple countries beyond its original country of establishment, often exercising significant economic and political influence globally.

Branch Plant

A factory or office operated in a country by a foreign company, often perceived as a subordinate extension of its parent company.