Projects S and L are equally risky,mutually exclusive,and have normal cash flows.Project S has an IRR of 15%,while Project L's IRR is 12%.The two projects have the same NPV when the WACC is 7%.Which of the following statements is correct?
A)If the WACC is 10%, both projects will have positive NPVs.
B)If the WACC is 6%, Project S will have the higher NPV.
C)If the WACC is 13%, Project S will have the lower NPV.
D)If the WACC is 10%, both projects will have a negative NPV.

Question

Quizplus · Accepted Answer

Since both projects have the same NPV at a WACC of 7%, and both have IRRs greater than 10%, both projects will have positive NPVs at a WACC of 10%.

Projects S and L Are Equally Risky,mutually Exclusive,and Have Normal