If Project a Generates $10 Million of Free Cash Flow

question 142

True/False

If project A generates $10 million of free cash flow over its five year useful life and project B generates $8 million of free cash flow over its five year useful life,then Project A will have a shorter payback period than Project B,assuming both projects require the same initial investment.

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Definitions:

Marginal Costs

The added cost that comes from producing an additional unit of a product or service.

Kinked Demand Model

An economic model that suggests prices remain stable because firms in oligopoly markets may not adjust their prices in response to small shifts in demand or cost.

Demand Curve Shifts

Changes in the demand curve caused by factors other than the price of the good, leading to a new quantity demanded at every price.

Legislative History

The records and documents created during the process of a bill becoming a law, used to understand the intent behind legislative actions.