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:

Process Cost System

An accounting system used to track and allocate costs of production by processes or departments, commonly used in industries where goods are produced in a continuous process.

Advertising Company

A business specializing in creating, planning, and handling advertising and sometimes other forms of promotion for its clients.

Chemical Company

A business entity that specifically focuses on the manufacturing, research, and sale of chemicals and chemical-based products.

ABC Philosophy

Stands for Activity-Based Costing, a philosophy that allocates overhead and indirect costs to specific activities, leading to more accurate product or service costing.