42 c Securehttpssrudesire2learncomdzlmsguizinguserattemptqui

#42

c Securehttps://sru.desire2learn.com/dz/lms/guizing/user/attempt/quiz start frame.d2l?ou-2355 , FIN-320-88-Managerial Finance (Winter 17) Course Home Content Dropbox Discussions Grades Quizzes Classlist Groups FIN 320 Final - Winter 2017 Est. Length: 2:00:00 Ryan Maraffi: Attemot Which of the following is correct explanation of 12% discount rate? NPV 12% 24% Discount Rate (%) Project I Project 2 t is the discount rate that makes NPV of project 1 equal to NPV of project 2 It is the discount rate for which neither projects should be undertaken. It is the discount rate for which project 1 should be chosen over project 2 It is the cross over rate where NPV of project 1 is greater than NPV of project 2. Save

Solution

Answer is A.

Discount Rate of 12% is the cross-over rate that makes NPV of Project 1 equal to NPV of Project 2.

NPV of Project 1 and NPV of Project 2 are equal which means that both projects are acceptable at this rate.

NPV of Project 2 is greater than NPV of Project 1 for each discount rate greater than 12%.