Project A has an IRR of 15 percent. Project B has an IRR of 18 percent. Both projects havethe same risk. Which of the following statements is most correct?a. If the WACC is 10 percent, both projects will have a positive NPV, andthe NPV of Project B will exceed the NPV of Project A.b.If the WACC is 15 percent, the NPV of Project B will exceed the NPVof Project A.c.If the WACC is less than 18 percent, Project B will always have ashorter payback than Project A.d.If the WACC is greater than 18 percent, Project B will always have ashorter payback than Project A.e. If the WACC increases, the IRR of both projects will decline. Phoenix has carried on business for a number of years as a retailer of a wide variety of consumer products and itoperates from a number of stores. In recent years the entity has found it necessary to provide credit facilities to itscustomers in order to maintain growth in revenue. As a result of this decision the liability to its bankers hasincreased substantially. Extracts from the financial statements for the year are provided below.INCOME STATEMENTS FOR THE YEARS ENDED 30 JUNERevenueCost of salesGross profitOther operating costsProfit before interestInterest from credit salesInterest payableProfit before taxationIncome tax expenseProfit for the yearSTATEMENTS OF FINANCIAL POSITION AT 30 JUNEProperty, plant and equipmentInventoriesTrade receivablesCashTotal assetsShare capitalReservesBank loansOther interest bearing borrowingsTrade payablesTax payableTotal equity and liabilitiesOther information1,1988**9²07|1,850(1.250)|៖ហ៊ុន ស៊ុនស៊ិឡ(550)ខ្លារ គឺ ៖ ផ្ន | ® 6 8៩៩20X7Sm278400492121,182320200270នន្ទ្រ|201,182Depreciation charged for the three years in question was as follows.Year ended 30 June20X7Sm55[²³9³9¶[²9³³³9¶ 1,838 *H * ** * * *$**8*8] *** 888 °|B|*|*|20X8$m6020x9$m70Required:Using suitable ratios, analyse the information provided and recommend what actions should betaken.

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Description: Project A has an IRR of 15 percent. Project B has an IRR of 18 percent. Both projects havethe same risk. Which of the following statements is most correct?a. If the WACC is 10 percent, both projects will have a positive NPV, andthe NPV of Project B

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Project A has an IRR of 15 percent. Project B has an IRR of 18 percent. Both projects have the same risk. Which of the following statements is most correct? a. If the WACC is 10 percent, both projects will have a positive NPV, and the NPV of Project B will exceed the NPV of Project A. b. If the WACC is 15 percent, the NPV of Project B will exceed the NPV of Project A. c. If the WACC is less than 18 percent, Project B will always have a shorter payback than Project A. d. If the WACC is greater than 18 percent, Project B will always have a shorter payback than Project A. e. If the WACC increases, the IRR of both projects will decline.

Project A has an IRR of 15 percent. Project B has an IRR of 18 percent. Both projects have the same risk. Which of the following statements is most correct? a. If the WACC is 10 percent, both projects will have a positive NPV, and the NPV of Project B will exceed the NPV of Project A. b. If the WACC is 15 percent, the NPV of Project B will exceed the NPV of Project A. c. If the WACC is less than 18 percent, Project B will always have a shorter payback than Project A. d. If the WACC is greater than 18 percent, Project B will always have a shorter payback than Project A. e. If the WACC increases, the IRR of both projects will decline.

EBK CONTEMPORARY FINANCIAL MANAGEMENT

14th Edition

ISBN:9781337514835

Author:MOYER

Publisher:MOYER

Chapter8: Analysis Of Risk And Return

Section: Chapter Questions

Problem 2P

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