Projects a and B Are Mutually Exclusive and Have Normal

question 89

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 cost of capital 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 cost of capital of 12%.
• E) the crossover rate for the two projects must be less than 12%.

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The total amount of money received by a company for goods sold or services provided during a certain period.

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