Depreciation, salvage values, net operating working capital requirements, and tax effects are all

included in these cash flows. The CFO also made subjective risk assessments of each project, and he

concluded that both projects have risk characteristics that are similar to the firm's average project.

Allied's WACC is $10\%.$You must determine whether one or both of the projects should be accepted.

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$1.$ a$.$ Draw NPV profiles for Projects L and S$.$ At what discount rate do the profiles cross?

b$.$Look at your NPY profile graph without referring to the actual NPVs and IRRs. Which projects $$should be accepted if they are independent? Mutually exclusive? Explain. Are your answers correct at any WACC less than $23\mathrm{.}6\%?$