You Are Considering Two Mutually Exclusive,equally Risky,projects

question 13

Multiple Choice

You are considering two mutually exclusive,equally risky,projects.Both have IRRs that exceed the WACC.Which of the following statements is CORRECT? Assume that the projects have normal cash flows,with one outflow followed by a series of inflows.

• A) If the two projects' NPV profiles do not cross,then there will be a sharp conflict as to which one should be selected.
• B) If the cost of capital is greater than the crossover rate,then the IRR and the NPV criteria will not result in a conflict between the projects.One project will rank higher by both criteria.
• C) If the cost of capital is less than the crossover rate,then the IRR and the NPV criteria will not result in a conflict between the projects.One project will rank higher by both criteria.
• D) For a conflict to exist between NPV and IRR,the initial investment cost of one project must exceed the cost of the other.
• E) For a conflict to exist between NPV and IRR,one project must have an increasing stream of cash flows over time while the other has a decreasing stream.If both sets of cash flows are increasing or decreasing,then it would be impossible for a conflict to exist,even if one project is larger than the other.

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Definitions:

Racial Inequality

The unequal treatment or perceptions of individuals based on their race or ethnicity, manifesting in various aspects of life including employment, education, and healthcare.

Apartheid

The system of institutionalized racial segregation and discrimination that existed in South Africa from 1948 until the early 1990s.

South Africa

A country located at the southern tip of the African continent, known for its diverse cultures, languages, and significant history of apartheid until the early 1990s.

Mau Mau Rebellion

A violent conflict that took place in Kenya during the 1950s, pitting colonial forces against Kikuyu tribespeople who formed the Mau Mau, fighting for land and freedom from British rule.