Projects a and B Are Mutually Exclusive and Have Normal

question 106

Multiple Choice

Projects A and B are mutually exclusive and have normal cash flows.Project A has an IRR of 15% and B's IRR is 20%.The company's WACC is 12%,and at that rate Project A has the higher NPV.Which of the following statements is CORRECT?

• A) Assuming the timing pattern of the two projects' cash flows is the same, Project B probably has a higher cost (and larger scale).
• B) Assuming the two projects have the same scale, Project B probably has a faster payback than Project A.
• C) The crossover rate for the two projects must be 12%.
• D) Since B has the higher IRR, then it must also have the higher NPV if the crossover rate is less than the WACC of 12%.
• E) The crossover rate for the two projects must be less than 12%.

---

Definitions:

Rheumatoid Arthritis

An autoimmune disorder that primarily affects joints, causing inflammation, pain, and deformity.

Pathology

The medical specialty that focuses on determining the cause and nature of diseases by examining body tissues and bodily fluids.

Xeroderma Pigmentosum

A rare genetic condition causing extreme sensitivity to ultraviolet radiation, leading to increased risk of skin cancer.

Chemical Carcinogen

A substance or agent that can cause cancer by altering the genetic material in cells or interfering with cellular processes.