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 0	Year 1	Year 2	Year 3	Year 4
Cashflow for S	-200	80	150	50	10
Cashflow for L	-200	10	10	120	210

Assume the company can get an unlimited amount of capital at that cost.

WACC	NPV (S)	NPV (L)
5%
10%
15%
20%
25%

Assume the company can get an unlimited amount of capital at that cost. If the companys cost of capital is 5%, what is the net present value of each Project? Whats the profit foregone if IRR method is used?

Select one:

a. NPVS = $59.27, NPVL = $63.24, $59.27

b. NPVS = $59.27, NPVL = $63.24, $3.97

c. NPVS = $100.81, NPVL = $112.45, $11.25

d. NPVS = $78.81, NPVL = $60.24, S18.57

e. NPVS = $63.66, NPVL = $95.02, $31.36

Continued from previous question. If the companys cost of capital is 15%, what is the net present value of each Project? Based on NPV, which project will you choose?

a. NPVS = $38.97, NPVL = $24.95, S

b. NPVS = $59.27, NPVL = $63.24, L

c. NPVS = $59.27, NPVL = $63.24, S

d. NPVS = $21.58, NPVL = $15.23, S

e. NPVS = $17.95, NPVL = $63.24, S

Continued from previous question. Which of the following statements is correct?

a. The crossover rate should be smaller than 10%.

b. If the WACC larger than the crossover rate, a conflict arises between the NPV and the IRR methods.

c. The crossover rate should be between 10% and 15%.

d. If the WACC is smaller than the crossover rate, you will choose project S using the NPV method.

e. The crossover rate should be between 15% and 20%.