Projects C and D Both Have Normal Cash Flows and Are

question 1

Multiple Choice

Projects C and D both have normal cash flows and are mutually exclusive.Project C has a higher NPV if the cost of capital is less than 12%, whereas Project D has a higher NPV if the cost of capital exceeds 12%.Which of the following statements is CORRECT?

• A) Project D is probably larger in scale than Project C.
• B) Project C probably has a faster payback.
• C) Project C probably has a higher IRR.
• D) The crossover rate between the two projects is below 12%.
• E) Project D probably has a higher IRR.

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Definitions:

Major Premise

The first premise in a syllogism, typically a general statement or proposition that asserts a universal truth or principle.

Categorical Syllogisms

A form of deductive reasoning consisting of a major premise, a minor premise, and a conclusion, each statement being categorical.

Moods

Moods refer to the different forms of a categorical syllogism, characterized by the arrangement of the quantity and quality of its propositions.

Middle Term

The term that appears in both premises of a standard syllogism but not in the conclusion, acting as a link in deductive reasoning.