A company is comparing two mutually exclusive projects with normal cash flows. P

Question

A company is comparing two mutually exclusive projects with normal cash flows. Project P has an IRR of 15 percent, while Project Q has an IRR of 20 percent. If the WACC is 10 percent, the two projects have the same NPV. Which of the following statements is most correct?
Question 1 answers
If the WACC is 12 percent, both projects would have a positive NPV.
If the WACC is 12 percent, Project Q would have a higher NPV than Project P.
If the WACC is 8 percent, Project Q would have a lower NPV than Project P.
All of the statements above are correct.
None of the statements above is correct.

Explanation / Answer

First statement, "If the WACC is 12 percent, both projects would have a positive NPV." is correct, BUT the second statement, "If the WACC is 12 percent, both projects would have a positive NPV." is most correct AS the third statement is not correct and thereby 4th and 5th statements are also not true.

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