projects s and l are 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?

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15-04-2022
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projects s and l are 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?

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Parrain Parrain · Answer 1 · 2022-04-22T15:28:16+02:00

Based on the IRR of Projects S and L, their risk, and the WACC, the correct statement is b. If the WACC is 13%, Project S will have the higher NPV.

What happens when WACC is 13%?

The IRR is rate of return that takes the NPV to zero. This means that if a project's WACC is less than IRR, then the NPV for that project will be less than 0.

Project L has an IRR of 12% which means that if the WACC is 13%, the NPV for this project will be negative.

Project S on the other hand would still have an IRR that is larger than the WACC and so would have a positive NPV.

In conclusion, option B is correct.

Find out more on IRR at https://brainly.com/question/7920964.