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Author Question: Westchester Corp. is considering two equally risky, mutually exclusive projects, both of which have ... (Read 21 times)

sc1250

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on: Aug 7, 2023

Question 1

Wells Inc. is considering a project that has the following cash flow data. What is the project’s payback?

Year:

0

1

2

3

Cash flows:

–$1,000

$600

$400

$400


◦

2.00 years


◦

2.16 years


◦

2.50 years


◦

2.73 years



Question 2

Westchester Corp. is considering two equally risky, mutually exclusive projects, both of which have normal cash flows. Project A has an IRR of 10%, while Project B’s IRR is 16%. When the WACC is 7%, the projects have the same NPV. Given this information, which of the following statements is correct?

◦

If the WACC is 14%, Project A’s NPV will be lower than Project B’s.


◦

If the WACC is 8%, Project A’s NPV will be higher than Project B’s.


◦

If the WACC is 6%, Project B’s NPV will be higher than Project A’s.


◦

If the WACC is 9%, Project B’s NPV will be lower than Project A’s.

Financial Management: Theory and Practice ¦ Brigham, Ehrhardt, Gessaroli, Nason ¦ 4th Edition
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Marked as best answer by sc1250 on Aug 7, 2023

leilani49

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Reply #1 on: Aug 7, 2023
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sc1250

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Reply 2 on: Aug 7, 2023
Wow, this really help

irishcancer18

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Reply 3 on: Yesterday
Thanks for the timely response, appreciate it

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