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%.

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Definitions:

Morality Origins

The investigation or discussion regarding where moral standards or values come from.

God's Laws

The moral and ethical codes believed to be ordained by a divine entity, often found within religious texts or traditions.

Golden Rule

A moral principle that advises treating others as one would want to be treated oneself.

Ethical Egoism

A moral philosophy that posits individuals should act in their own self-interest because it is the moral thing to do.