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

question 55

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,Project L must also have a positive NPV.
• C) If the WACC falls,each project's IRR will increase.
• D) If the WACC increases,each project's IRR will decrease.
• E) 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:

Mutual Mistake

A situation in a contract where all parties involved have a shared misunderstanding regarding a fundamental fact or aspect of the agreement.

Unilateral Mistake

A mistake made by only one party in a contract, which may not always void the contract.

Legal Consent

Involves the agreement or permission given by a person who is of legal age and has the mental capacity to make an informed decision.

Mutual Mistake

A situation in contract law where all parties involved have a mistaken understanding of one or more material facts relevant to the contract.