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Lancaster Corp. is considering two equally risky, mutually exclusive projects, both of which are characterized by having an initial cash outflow followed by a series
Lancaster Corp. is considering two equally risky, mutually exclusive projects, both of which are characterized by having an initial cash outflow followed by a series of cash inflows. The two projects have the same amount of initial cash outflows, and the same length of life. Project A has an IRR of while Project Bs IRR is When the cost of capital is the projects have the same NPV Given this information, which of the following statements is CORRECT?
If the cost of capital is Project As NPV will be higher than Project Bs
If the cost of capital is Project Bs NPV will be higher than Project AsIf the cost of capital is greater than Project As IRR will exceed Project Bs
D If the cost of capital is Project Bs NPV will be higher than Project As
E If the cost of capital is Project As NPV will be higher than Project BS
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