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Normal Projects S and L Have the Same NPV When

question 24

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Normal Projects S and L have the same NPV when the discount rate is zero.However, Project S's cash flows come in faster than those of L.Therefore, we know that at any discount rate greater than zero, L will have the higher NPV.


Definitions:

Gini Coefficient

A scale assessing the distribution of income among a population, where 0 denotes total equality and 1 indicates complete disparity.

Income

Periodic financial returns from work engagements or investments.

Lorenz Curve

A graphical representation of the distribution of income or wealth within a society, indicating levels of inequality.

X-axis

The horizontal line on a graph that represents the independent variable.

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