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%.

Question

Quizplus · Accepted Answer

Project B, with a higher IRR, likely has a faster payback period if both projects are of the same scale.

Projects a and B Are Mutually Exclusive and Have Normal