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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.
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 1 Year 2 Year 3 Year 4 Year D -200 100 140 50 10 Cashflow for s Cashflow for -200 10 10 90 260 Assume the company can get an unlimited amount of capital at that cost. WACC NPV (S) 5% NPVL 10% 15% 20% 25% If the company's cost of capital is 10%, what is the net present value of each Project? What's the profit foregone if IRR method is used? Select one: a. NPVS - $82.26, NPVL - $75.63, $3.97 b. NPVS - $83.24, NPVL - $32.35, S-29.89 c. NPVS - $100.81, NPVL - $112.45, $11.25 d. NPVS = $33.35, NPVL = $63.24. $29.89 e. NPVS = $51.01. NPVL = $62.56, $11.55 Continued from previous question. If the company's cost of capital is 15%, what is the net present value of each Project? Based on NPV, which project will you choose? Select one: a. NPVS = $18.34, NPVL = $24.95, S b. NPVS - $31.41, NPVL - $12.65, L c. NPVS = $82.26, NPVL = $75.63, L d. NPVS = $31.41, NPVL = $24.09, S e. NPVS = $100.81, NPVL = $112.45, L Continued from previous question. Which of the following statements is correct? Select one: a. The crossover rate should be between 15% and 20% b. If the WACC is larger than the crossover rate, you will choose project Lusing the NPV method. c. The crossover rate should be smaller than 10%. d. If the WACC is larger than the crossover rate, a conflict arises between the NPV and the IRR methods e. The crossover rate should be between 10% and 15%. OO
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