Lancaster corp. is considering two equally risky, mutually exclusive projects, both of which have normal cash flows. project a has an irr of 11%, while project b's irr is 14%. when the cost of capital is 8%, the projects have the same npv. given this information, which of the following statements is correct? a. if the cost of capital is 9%, project a's npv will be higher than project b's. b. if the cost of capital is 6%, project b's npv will be higher than project a's. c. if the cost of capital is greater than 14%, project a's irr will exceed project b's. d. if the cost of capital is 9%, project b's npv will be higher than project a's. e. if the cost of capital is 13%, project a's npv will be higher than project b's.

Explanation:

IRR is the discount rate point where NPV equal to 0. Given, both projects have same NPV at 8%, when discount rate is higher than 8%, NPV of project A will decrease faster than that of project B because project A's IRR is lower than project B's IRR. When discount rate is lower than 8%, NPV of project A will increase faster than project B's.

We will go through each of the answer options:

A. If the cost of capital is 9%, Project A's NPV will be higher than Project B's. False

Explaination: Cost of capital here is higher than 8%, NPV of project A will be lower than that of project B.

B. If the cost of capital is 6%, Project B's NPV will be higher than Project A's. False

Explaination:

C. If the cost of capital is greater than 14%, Project A's IRR will exceed Project B's. False

Explaination: IRR is dependent on pattern of cashflows rather than cost of capital.

D. If the cost of capital is 9%, Project B's NPV will be higher than Project A's. True

Explaination: This is an opposite answer to option A.

E. If the cost of capital is 13%, Project A's NPV will be higher than Project B's. False

Explaination: When the cost of capital is 13%, NPV of project A is negative and NPV of project B is positive.

whole quiz

1. the sum of all activities involved in getting high-quality products into the marketplace

2.operations

3. the principle of looking at the supply chain as a whole in order to improve the overall flow through the system.

4. produced; performed

5. activities producing tangible products, such as radios, newspapers, buses, and textbooks.

6. activities producing intangible and tangible products, such as entertainment, transportation, and education.

7.   customer focus

8. analyzing a competitor's products to identify desirable improvements

9. the systematic direction and control of the processes that transform resources into finished projects that create value for and provide benefits to consumers.

10. operation management.

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