Projects a and B Have Identical Expected Lives and Identical

question 104

Multiple Choice

Projects A and B have identical expected lives and identical initial cash outflows (costs) .However,most of one project's cash flows come in the early years,while most of the other project's cash flows occur in the later years.The two NPV profiles are given below: Which of the following statements is CORRECT?

• A)More of Project B's cash flows occur in the later years.
• B)We must have information on the cost of capital in order to determine which project has the larger early cash flows.
• C)The NPV profile graph is inconsistent with the statement made in the problem.
• D)The crossover rate, i.e., the rate at which Projects A and B have the same NPV, is greater than either project's IRR.
• E)More of Project A's cash flows occur in the later years.

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Definitions:

Ba'ath Party

A political party advocating Arab unity and socialism, historically significant in Syria and Iraq.

Plurality of Americans

A group within the United States population that represents the largest segment, but not necessarily an absolute majority.

U.S. Forces

Military personnel and units of the United States, including the Army, Navy, Air Force, Marines, and Coast Guard.

Iraq

A country in Western Asia, rich in history and culture, known for its ancient civilizations such as Sumer and Babylon, and more recent conflicts.