You Are Considering Two Projects with the Following Cash Flows

question 366

Multiple Choice

You are considering two projects with the following cash flows:

• A) Both projects have the same future value given a zero rate of return.
• B) Both projects have the same future value at the end of year 4, given a positive rate of return.
• C) Both projects have the same future value at any point in time, given a positive rate of return.
• D) Project A has a higher future value than project B, given a positive rate of return.
• E) Project A and B are unequal.

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Definitions:

Average Variable Cost

The per-unit variable cost of production, calculated by dividing total variable costs by the quantity of output produced.

Long-Run Scale

Refers to the time period in which all factors of production and costs are variable, allowing companies to adjust all inputs in response to market conditions.

Short-Run

A period in which at least one input is fixed, limiting the firm's capacity to adjust to changes in demand or market conditions.

Positive Profits

Financial gains that are greater than zero, indicating a company's revenues exceed its costs and expenses.