Projects S and L arc equally risky, mutually exclusive, and have normal cash flo

Question

Projects S and L arc 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.

Explanation / Answer

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

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