Question
18.19.20.21.22Assume that the economy is enjoying a strong boom, and as a result interest rates and money costs generally are relatively high. The WACC for
18.19.20.21.22Assume that the economy is enjoying a strong boom, and as a result interest rates and money costs generally are relatively high. The WACC for two mutually exclusiveprojects that are being considered is 12%. Project S has an IRRof 20% while Project L's IRRis 15%. The projects have the same NPV at the 129%cyou believe that the economy will soon fall into a mild recession, and money costs and thus your WACC will soon decline. You also think t24.kthat the noOcYou should recommend Project S, because at the new WACC it will have the higher NPV.25 o d You should reject both projects because they will bothountil the WACC has decreased, and their cash flows will not be affected by the change in economic conditions. Under these conditions, which of the following staternents iORRECT?Oa.You should delay a decision until you have more information on the projects, even if this rmeans that a competitor might come in and capture this marketOb.You should recommend Project L because at the new WACcCit will have the higher NPVHowever,1ded
Assume that the economy is enjoying a strong boom, and as a result interest rates and money costs generally are relatisely high. The WACC for two mutually exclusive projects that are being considered is 12% Project S has an IRR of 20% while Project Ls IRR is 15%. The projects have the same NPV at the 12% current WACC However. you believe that the economy will soon fall into as mild recpesion, and money costs and thus your WACC will soon decline. You also think that the projects will not be funded until the WACC has decreased, and their cash flows will not be affected by the change in economic conditions. Under these conditions, which of the following statements is CORRECT? a. You should delay a decision until you have more informstion on the projects, even if this mears that a competitor might come in and capture this market. b. You shiould recommend Pipject L because at the new Waccit will have the higher NPY. c. You should tecorrmend project S, because at the new WACC it will have the higber NPV. A You shiould reject both projects becanse they will both have negative NPVs Assume that the economy is enjoying a strong boom, and as a result interest rates and money costs generally are relatisely high. The WACC for two mutually exclusive projects that are being considered is 12% Project S has an IRR of 20% while Project Ls IRR is 15%. The projects have the same NPV at the 12% current WACC However. you believe that the economy will soon fall into as mild recpesion, and money costs and thus your WACC will soon decline. You also think that the projects will not be funded until the WACC has decreased, and their cash flows will not be affected by the change in economic conditions. Under these conditions, which of the following statements is CORRECT? a. You should delay a decision until you have more informstion on the projects, even if this mears that a competitor might come in and capture this market. b. You shiould recommend Pipject L because at the new Waccit will have the higher NPY. c. You should tecorrmend project S, because at the new WACC it will have the higber NPV. A You shiould reject both projects becanse they will both have negative NPVs
18.19.20.21.22Assume that the economy is enjoying a strong boom, and as a result interest rates and money costs generally are relatively high. The WACC for two mutually exclusiveprojects that are being considered is 12%. Project S has an IRRof 20% while Project L's IRRis 15%. The projects have the same NPV at the 129%cyou believe that the economy will soon fall into a mild recession, and money costs and thus your WACC will soon decline. You also think t24.kthat the noOcYou should recommend Project S, because at the new WACC it will have the higher NPV.25 o d You should reject both projects because they will bothountil the WACC has decreased, and their cash flows will not be affected by the change in economic conditions. Under these conditions, which of the following staternents iORRECT?Oa.You should delay a decision until you have more information on the projects, even if this rmeans that a competitor might come in and capture this marketOb.You should recommend Project L because at the new WACcCit will have the higher NPVHowever,1ded
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