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.The same 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.The same 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.
Correct Answer:
Verified
Q61: Projects S and L both have normal
Q64: Which of the following statements is CORRECT?
Q72: Company is considering a project that has
Q74: Harry's Inc.is considering a project that has
Q75: McCall Manufacturing has a WACC of 10%.The
Q78: Tuttle Enterprises is considering a project that
Q79: Westchester Corp.is considering two equally risky,mutually exclusive
Q80: Which of the following statements is CORRECT?
Q81: Computer Systems is considering a project that
Q82: Cornell Enterprises is considering a project that
Unlock this Answer For Free Now!
View this answer and more for free by performing one of the following actions
Scan the QR code to install the App and get 2 free unlocks
Unlock quizzes for free by uploading documents