Consider two projects,X and Y.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 must be greater than 10%.
B) If the WACC is 8%, Project X will have the higher NPV.
C) If the WACC is 18%, Project Y will have the higher NPV.
D) Project X is larger in the sense that it has the higher initial cost.
E) The crossover rate must be less than 10%.

Question

Quizplus · Accepted Answer

Again,it is useful to draw NPV profiles that fit the description given in the question.Any number that meets the criteria will do. 11ea42d0_c08b_a74c_9abf_5fc508d2fc5d_TB2090_00 As we can see from the graph,statement a is true; the other statements are false.

Consider Two Projects,X and Y