Question: 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

  1. 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 cost of capital 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 cost of capital is 8%, Project X will have the higher NPV.

c.

If the cost of capital 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%.

I know A is correct, but just would like to know the logic to it as I have no idea how the answer is A. Thanks.

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