Projects S and L are equally risky, mutually exclusive, and have normal cash flows. Project S's IRR is 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? If the WACC for both projects is 10%, Project S will have a larger NPV than Project L. If the WACC for both projects is 18%, both projects will have positive NPVs. If the WACC for both projects is 13%, Project L will have a larger NPV than Project S. If the WACC for both projects is 9%, both projects will have negative NPVs. If the WACC for both projects is 6%, Project S will have a larger NPV than Project L.
Projects S and L are equally risky, mutually exclusive, and have normal cash flows. Project S's IRR is 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? If the WACC for both projects is 10%, Project S will have a larger NPV than Project L. If the WACC for both projects is 18%, both projects will have positive NPVs. If the WACC for both projects is 13%, Project L will have a larger NPV than Project S. If the WACC for both projects is 9%, both projects will have negative NPVs. If the WACC for both projects is 6%, Project S will have a larger NPV than Project L.
Chapter10: Capital Budgeting: Decision Criteria And Real Option
Section: Chapter Questions
Problem 7P
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![Projects S and L are equally risky, mutually exclusive, and have normal cash flows.
Project S's IRR is 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?
If the WACC for both projects is 10%, Project S will have a larger NPV than
Project L.
If the WACC for both projects is 18%, both projects will have positive NPVs.
If the WACC for both projects is 13%, Project L will have a larger NPV than
Project S.
If the WACC for both projects is 9%, both projects will have negative NPVs.
If the WACC for both projects is 6%, Project S will have a larger NPV than
Project L.](/v2/_next/image?url=https%3A%2F%2Fcontent.bartleby.com%2Fqna-images%2Fquestion%2F617415ee-4793-40b8-9367-a80595dc113d%2F3747d2a6-138a-450b-8a07-8f8429c2eb18%2Fp7uibj3_processed.png&w=3840&q=75)
Transcribed Image Text:Projects S and L are equally risky, mutually exclusive, and have normal cash flows.
Project S's IRR is 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?
If the WACC for both projects is 10%, Project S will have a larger NPV than
Project L.
If the WACC for both projects is 18%, both projects will have positive NPVs.
If the WACC for both projects is 13%, Project L will have a larger NPV than
Project S.
If the WACC for both projects is 9%, both projects will have negative NPVs.
If the WACC for both projects is 6%, Project S will have a larger NPV than
Project L.
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