Normal Projects S and L Have the Same NPV When

question 24

True/False

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.

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Definitions:

Gold Mine

An excavation or operation aimed at extracting gold from the ground, often involving both open-pit and underground methods.

Ounce

A unit of weight used in some countries, typically equal to one sixteenth of a pound or about 28.35 grams.

Hedge

An investment made to reduce the risk of adverse price movements in an asset, typically involving derivatives like options or futures.

Bushels

A unit of volume that is used to measure agricultural commodities.