Westchester Corp. is considering two equally risky, mutually ...

[sc1250]

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

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2.00 years

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2.16 years

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2.50 years

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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?

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

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

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

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

[leilani49]

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Only 39% of students answer this correctly

[sc1250]

YES! Correct, THANKS for helping me on my review

[carlsona147]

Thanks for the timely response, appreciate it