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Having trouble with this question. Show work if possible Use the information to answer the following questions. A company is analyzing two mutually exclusive projects,
Having trouble with this question. Show work if possible
Use the information to answer the following questions. A company is analyzing two mutually exclusive projects, S and L, whose cash flows are shown below: Year 0 Year 1 Year 2 Year 3 Year 4 Cashflow for S -100 40 50 30 30 Cashflow for L -150 10 10 50 200 Assume the company can get an unlimited amount of capital at that cost. WACC NPV (S) NPV (L) 5% 10% 15% 20% 25% If the company's cost of capital is 15% and the decision is made by choosing the project with the higher IRR, how much value will be forgone? (Hint: Complete the NPV profile) Select one: a. $12.45 b. $ 4.01 c. $29.89 O d. $20.80 X e. $ 0.00 Continued from previous question. Which of the following statements is correct? Select one: a. The crossover rate should be smaller than 10%. b. If the WACC is larger than the crossover rate, a conflict arises between the NPV and the IRR methods. c. The crossover rate should be between 15% and 20%. O d. If the WACC is smaller than the crossover rate, you will choose project S using the NPV method. x e. The crossover rate should be larger than 20%Step by Step Solution
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