Projects S and L Both Have Normal Cash Flows,and the Projects

question 50

Multiple Choice

Projects S and L both have normal cash flows,and the projects have the same risk; hence,both are evaluated with the same WACC,10%.However,S has a higher IRR than L.Which of the following statements is correct?

• A)Project S must have a higher NPV than Project L.
• B)If Project S has a positive NPV, then Project L must also have a positive NPV.
• C)If the WACC falls, then each project's IRR will increase.
• D)If Projects S and L have the same NPV at the current WACC, 10%, then Project L, the one with the lower IRR, would have a higher NPV if the WACC used to evaluate the projects declined.

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Definitions:

Discrimination

Unjust or prejudicial treatment of different categories of people, especially on the grounds of race, age, or sex.

Ingroup/Outgroup Bias

The tendency for people to favor members of their own group (the ingroup) over those from different groups (the outgroup), influencing perceptions and behaviors.

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