Westchester Corp

question 81

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 9%, Project B's NPV will be higher than Project A's.

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Definitions:

Direct Manufacturing Cost

Expenses directly associated with the production of goods, including labor and materials costs.

Indirect Manufacturing Cost

Costs related to the production process that are not directly traceable to specific products, such as maintenance, supervision, and utility expenses.

Net Operating Income

The profit generated from a company's normal business operations after subtracting operating expenses from operating revenue.

Product Costs

Costs that are incurred to create a product that includes direct materials, direct labor, and manufacturing overhead.