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oject Red     Project White Year                                   Cash Flows        Cash Flows 0                                          -$1,000              -$1,000 1                                               100                     700 2                                              200                     400 3                                              600                     200 4                                              800

oject Red     Project White Year                                   Cash Flows        Cash Flows 0                                          -$1,000              -$1,000 1                                               100                     700 2                                              200                     400 3                                              600                     200 4                                              800

Intermediate Financial Management (MindTap Course List)
Intermediate Financial Management (MindTap Course List)
13th Edition
ISBN:9781337395083
Author:Eugene F. Brigham, Phillip R. Daves
Publisher:Eugene F. Brigham, Phillip R. Daves
Chapter12: Capital Budgeting: Decision Criteria
Section: Chapter Questions
Problem 7P: Your division is considering two investment projects, each of which requires an up-front expenditure...
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Central Energy is considering two mutually exclusive projects, Project Red and Project The projects have the following cash flows:

                                           Project Red     Project White

Year                                   Cash Flows        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?

20.04%

10.00%

0.00%

24.96%

14.30%

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