# Projects S and L are equally risky, mutually exclusive, and have normal cash flows

Projects S and L are equally risky, mutually exclusive, and have normal cash flows

Question 13

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Projects S and L are equally risky, mutually exclusive, and have normal cash flows. Project S has an IRR of 15%, while Project L’s IRR is 12%. The two projects have the same NPV when the WACC is 7%. Which of the following statements is CORRECT?

If the WACC is 10%, both projects will have positive NPVs.

If the WACC is 6%, Project S will have the higher NPV.

If the WACC is 13%, Project S will have the lower NPV.

If the WACC is 10%, both projects will have a negative NPV.

Project S’s NPV is more sensitive to changes in WACC than Project L’s.

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