The weighted average cost of capital $($WACC$)$ for two mutually exclusive projects considered is $8\%.$ Project K has an internal rate of return $($IRR$)$ of $20\%,$ while Project R$$s IRR is $15\%.$ The projects have the same net present value $($NPV$)$ at the current WACC of $8\%.$ Under these conditions, which of the following statements is CORRECT?

You should delay a decision until you have more information on the projects, even if this means that a competitor might come in and capture this market.

You should recommend Project R$,$ because at the new WACC, it will have a higher NPV$.$

$$ Incorrect

Feedback:

Incorrect! Recall the relationship between NPV and WACC to make an informed decision about the two projects.

You should recommend Project K$,$ because at the new WACC, it will have a higher NPV$.$

You should reject both projects because they will both have negative NPVs under the new conditions.