McCall Manufacturing has a WACC of 10%. The firm is

McCall Manufacturing has a WACC of 10%. The firm is considering two normal, equally risky, mutually exclusive, but not repeatable projects. The two projects have the same investment costs, but Project A has an IRR of 15%, while Project B has an IRR of 20%. Assuming the projects' NPV profiles cross in the upper right quadrant, which of the following statements is Correct Answer?
a. Each project must have a negative NPV.
b. Since the projects are mutually exclusive, the firm should always select Project B.
c. If the crossover rate is 8%, Project B will have the higher NPV.
d. Only one project has a positive NPV.
e. If the crossover rate is 8%, Project A will have the higher NPV.

$1.99
Sales 0
Views 244
Comments 0
  • CreatedJanuary 09, 2013
  • Files Included
Advertisment Here