Question 7 Consider the following data in $millions for two independent projects. The NPV of A @5% - $3.5 million, the NPV of A @10% - $0,50 million, and the NPV of A @15% --$2 million The NPV of B @5% = $3 million, the NPV of B @10% = $1.0 million, and the NPV of B @15% = - $0.50 million Answers a. Accept Project A only @15% and B only at 15% b. Accept Project A only @10% and Project B only @10% c. Accept both Project A and Project B @5% and @10% d. Don't choose either project Question 8 Consider the following two mutually exclusive projects. Project A has an NPV of $0.5 billion, an IRR of 16% and a payback period of 4 years. Project B has an NPV of $600 million, and IRR of 15% and a Payback period of 3 years. Which project should be chosen? Answers: a. No answer because we don't know the costs. We have to compare the costs to the NPV Project B c. Both projects because both NPV's are positive d. Neither project because they are mutually exclusive e. Project A Question 9 Which of the following is true? Answers: a. The shorter the project's payback period, the more attractive it becomes WACC is the same as expenses or costs of doing business c. When interest rates rise, WACC rises, so more projects would be undertaken and the firm's capital budget will increase (that is, they will invest more in projects and products.) d. Independent projects can be mutually exclusive