Project S and L both have initial cost of $10,000, followed by a series of positive cash inflows. Project Ss undiscounted net cash flows total $20,000, while Ls total undiscounted flows are $30,000. At a WACC of 10%, the two projects have identical NPVs. Which projects NPV is more sensitive to changes in the WACC?

a. Both projects are equally sensitive to changes in the WACC since their NPVs are equal at all costs of capital.

b. The solution cannot be determined because the problem gives us no information that can be used to determine the projects relative IRRs.

c. Project L.

d. Neither project is sensitive to changes in the discount rate, since both have NPV profiles that are horizontal.

e. Project S.