4. The following information on two mutually exclusive projects is given below: N Project B 0 -5000 1 1350 1350 2 1800 1800 3 1500 5406 IRR 25% 25% Which of the following statements is correct? Project A -3000 e) Project A would be a better choice, as the required investment is smaller with the same rate of return. f) Since the two projects have the same rate of return, they are indifferent. g) Project B would be a better choice as long as the investor's MARR is less than 25%. h) Project B is a better choice regardless of the investor's MARR. 5. Use the IRR method to select either compressor I or compressor II. Compressor Fixed cost Life Salvage value Annual operating costs MARR $7000 $1000 $4000 II $9000 10 $3500 15% a) Compressor I is preferred, because its increment of investment exceeds 15%. b) Compressor II is preferred, because its increment of investment exceeds 15%. c) Compressor I is preferred, because its rate of return exceeds 15%. d) Compressor II is preferred, because its rate of return exceeds 15%. e) None of the above. 6) If a company has returns of 17% and a WACC of 10%, then: a) The company is losing 7 cents for every dollar spent (-7%). b) There is no debt. c) The company is profiting 7cents for every dollar spent (7%) d) The equity cost is 7% 7) If X company's debt was $240 billion, its market CAPM (or equity value) is $60 billion. Then: a) X's WACC = (80% +20%)/2 b) X is expected to lose 20% c) X finances operations with 20% equity and 80% debt. d) X finances operations with 75% equity and 25% debt.

4. The following information on two mutually exclusive projects is given below: Which of the following statements is correct? e) Project A would be a better choice, as the required investment is smallet with the same rate of return. f) Since the two projects have the same rate of return, they are indifferent. g) Project B would be a better choice as long as the investor's MARR is less than 25%. h) Project B is a better choice regardless of the investor's MARR. 5. a) Compressor I is preferred, because its incremenu vi monnt nent exceeds 15%. b) Compressor II is preferred, because its increment of investment exceeds 15%. c) Compressor 1 is preferred, because its rate of return exceeds 15%. d) Compressor 11 is preferred, because its rate of return exceeds 15%. e) None of the above. 6) If a company has returns of 17% and a WACC of 10%, then: a) The company is losing 7 cents for every dollar spent (7%). b) There is no debt. c) The company is profiting 7 cents for every dollar spent ( 7%) d) The equity cost is 7% 7) If X company's debt was $240 billion, its market CAPM (or equity value) is $60 billion. Then: a) X 's WACC =(80%+20%)/2 b) X is expected to lose 20% c) X finances operations with 20% equity and 80% debt. d) X finances operations with 75% equity and 25% debt