# Corporate Finance - Corporate Finance Section 2

>>>>>>>>Corporate Finance Section 2

• A

two projects have the same NPV.  • B

a project’s NPV changes sign from negative to positive.  • C

two projects have the same internal rate of return.  • Option : A
• Explanation : The crossover rate is the rate at which the NPVs of the projects are the same.

• Option : B
• Explanation : The vertical axis represents zero discount rate. The point at which the NPV profile crosses the vertical axis is simply the sum of undiscounted cash flows.

• A

6.30%.  • B

9.00%.  • C

9.15%.  • Option : C
• Explanation : Wd = (D/E) / (1 + D/E) = 1 / (1 + 1) = 50% We = 1 - Wd = 50% WACC = Wd Rd (1 - t) + We Re WACC = 50% * 9% * (1 - 30%) + 50% * 12% = 9.15%

• A

14.45%.  • B

15.47%.  • C

16.33%.  • Option : B
• Explanation : Wd = (D/E) / (1 + D/E) = 0.5 / (1 + 0.5) = 33.3%
We = 1 - Wd = 66.7%
WACC = Wd Rd (1 - t) + We Re
WACC = 33.3%* 12%* (1 - 30%) + 66.7% * 19% = 15.47%.

• A

10.82%.  • B

11.08%.  • C

12.39%.  • Option : C
• Explanation : Wd = (D/E) / (1 + D/E) = 0.5 / (1 + 0.5) = 33.3%
We = 1 - Wd = 66.7%
WACC = Wd Rd (1 - t) + We Re
WACC = 33.3% * 11% * (1 - 35%) + 66.7% * 15% = 12.39%