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McCall Manufacturing has a WACC of 9%. The firm is considering two normal, equally risky, mutually exclusive, but not repeatable projects. The two projects have
McCall Manufacturing has a WACC of 9%. The firm is considering two normal, equally risky, mutually exclusive, but not repeatable projects. The two projects have the same investment costs, but Project A has an IRR of 14%, while Project B has an IRR of 18%. Assuming the projects' NPV profiles cross in the upper right quadrant, which of the following statements is CORRECT?
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Since the projects are mutually exclusive, the firm should always select Project B.
If the crossover rate is 8%, Project A will have the higher NPV.
If the crossover rate is 11%, Project A will have the higher NPV.
Each project must have a negative NPV.
Only one project has a positive NPV.
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