Author Question: Westchester Corp. is considering two equally risky, mutually exclusive projects, both of which have ... (Read 20 times)

sc1250 · **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

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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 · **Reply #1 on:** Aug 7, 2023

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