Projects A and B are mutually exclusive and have normal cash flows.Project A has an IRR of 15% and Project B's IRR is 20%.The company's WACC is 12%,and at that rate Project A has the higher NPV.Which of the following statements is correct?
A)The crossover rate for the two projects must be less than 12%.
B)Assuming the timing pattern of the two projects' cash flows is the same, Project B probably has a higher cost (and larger scale).
C)Assuming the two projects have the same scale, Project B probably has a faster payback than Project A.
D)Since B has the higher IRR, then it must also have the higher NPV if the crossover rate is less than the WACC of 12%.

Question

Quizplus · Accepted Answer

Project B, with a higher IRR, likely has a faster payback period if both projects are of the same scale.

Projects a and B Are Mutually Exclusive and Have Normal