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Normal Projects Q and R Have the Same NPV When

question 81

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Normal Projects Q and R have the same NPV when the discount rate is zero. However, Project Q has larger early cash flows than R. Therefore, we know that at all discount rates greater than zero, Project R will have a greater NPV than Q.


Definitions:

Double Line

This term is often used in accounting to denote totals or sums in financial statements, represented by drawing a double line.

Normal Balance

An account balance on the side where an increase in the account is recorded.

Ledger

A record that consolidates all transactions related to a particular account, facilitating the preparation of financial statements.

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