Normal Projects Q and R Have the Same NPV When

question 81

True/False

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.

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Definitions:

Par Value

The face value of a bond or stock as stated by the issuer, which bears significance for accounting and financial regulation.

Annual Return

The percentage change in an investment's value over a year, considering both capital gains and dividends.

Indefinitely

An unspecified period of time that may continue forever, without a predetermined endpoint.

Dividend

A portion of a company's earnings distributed to its shareholders, usually periodically.