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:

Experimental Treatment

A new or untested medical intervention or drug being studied to evaluate its effectiveness and safety.

Placebo

A substance or treatment that has no active therapeutic effect, used in clinical trials for comparison.

Fracture

The breaking of a bone, typically as a result of an accident, injury, or excessive force.

Placebo Effect

A beneficial effect, produced by a placebo drug or treatment, that cannot be attributed to the properties of the placebo itself, and must instead be due to the patient's belief in that treatment.