The WACC for Two Mutually Exclusive Projects That Are Being

question 3

Multiple Choice

The WACC for two mutually exclusive projects that are being considered is 8%.Project K has an IRR of 20% while Project R's IRR is 15%.The projects have the same NPV at the 8% current WACC.However,you believe that money costs and thus your WACC will also increase.You also think that the projects will not be funded until the WACC has increased,and their cash flows will not be affected by the change in economic conditions.Under these conditions,which of the following statements is CORRECT?

• A) You should delay a decision until you have more information on the projects, even if this means that a competitor might come in and capture this market.
• B) You should recommend Project R, because at the new WACC it will have the higher NPV.
• C) You should recommend Project K, because at the new WACC it will have the higher NPV.
• D) You should recommend Project K because it has the higher IRR and will continue to have the higher IRR even at the new WACC.
• E) You should reject both projects because they will both have negative NPVs under the new conditions.

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Grasp the concept of wrongful dissociation and its consequences on the partnership and the dissociated partner.

Learn the rules governing the liability of dissociated partners for obligations incurred while they were partners.

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Definitions:

Cultural Dimension

An aspect of a culture that can be measured and compared with other cultures, often used in studying cross-cultural communication and behaviors.

Power Distance

A societal attribute determining the level to which people in a society anticipate and accept that power is allocated unevenly.

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The manner in which an individual expresses or conveys information to others, which can vary based on culture, personality, and context.

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