Central Energy is considering two mutually exclusive projects, Project Red and  Project The projects have the following cash flows:   Year Project Red  Cash Flows Project White  Cash Flows 0 -$1,000 -$1,000 1 100 700 2 200 400 3 600 200 4 800 100   Assume that both projects have a 10 percent WACC. At what weighted average cost of capital would the two projects have the same net present value? a. 0.00% b. 10.00% c. 20.04% d. 24.96% e. 14.30%

Intermediate Financial Management (MindTap Course List)
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Author:Eugene F. Brigham, Phillip R. Daves
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Chapter12: Capital Budgeting: Decision Criteria
Section: Chapter Questions
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Central Energy is considering two mutually exclusive projects, Project Red and  Project The projects have the following cash flows:

 

Year

Project Red

 Cash Flows

Project White

 Cash Flows

0

-$1,000

-$1,000

1

100

700

2

200

400

3

600

200

4

800

100

 

Assume that both projects have a 10 percent WACC.

At what weighted average cost of capital would the two projects have the same net present value?

a. 0.00%

b. 10.00%

c. 20.04%

d. 24.96%

e. 14.30%

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