S and L are mutually exclusive

Year 0 Year 1 Year 2 Year 3 Year 4

Cashflow for S -100 40 50 30 30

Cashflow for L -100 10 10 50 90

Assume you can get unlimited capital at the cost.

WACC NPV (S) NPV (L)

5%

10

15

20

25

Assume the WACC is 10%.Which of the following statements is correct? (complete the NPV profile),

Select one:

a.The crossover rate should be smaller than 5%.

b.If the WACC is smaller than the crossover rate, you will choose project S using the NPV method.

c.If the WACC larger than the crossover rate, a conflict arises between the NPV and the IRR methods.

d.The crossover rate should be between 5% and 10%.

e.The crossover rate should be larger than 20%.

I chose A, but not sure.