Project X's IRR Is 19% and Project Y's IRR Is

question 16

Multiple Choice

Project X's IRR is 19% and Project Y's IRR is 17%.The projects have the same risk and the same lives,and each has constant cash flows during each year of their lives.If the WACC is 10%,Project Y has a higher NPV than X.Given this information,which of the following statements is correct?

• A)The crossover rate between the two projects must be less than 10%.
• B)The crossover rate between the two projects must be greater than 10%.
• C)If the WACC is 8%, Project X will have the higher NPV.
• D)If the WACC is 18%, Project Y will have the higher NPV.

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Definitions:

Returns

The profit or loss derived from an investment over a specified period, often expressed as a percentage.

Dividend Yield

A financial ratio that indicates how much a company pays out in dividends each year relative to its share price.

Quarterly Dividends

Dividends paid by a corporation to its shareholders at regular intervals every three months.

Dividend Yield

The annual dividend a company provides vis-a-vis its stock price, presented as a financial ratio.