The Net Present Value for a Project with a Relatively

question 36

Multiple Choice

The net present value for a project with a relatively long life is more sensitive to changes in the required rate of return than the net present value for a project with a relatively short life because:

• A)the internal rate of return is greater the longer the term of a project.
• B)interest is compounded over time.
• C)a change in the discount rate has a much greater impact on more distant cash flows.
• D)distant cash flows are more uncertain.