Projects a and B Have Identical Expected Lives and Identical

question 6

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:
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Which of the following statements is CORRECT?

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

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Definitions:

Haworth Structure

A conventional way of representing the cyclic structure of monosaccharides with a simple three-dimensional perspective.

β-Pyranose

A cyclic form of sugar where the ring contains six atoms, one of which is an oxygen atom, and the hydroxyl group at the anomeric carbon is in the equatorial position for beta configuration.

Pyranose

A form of sugar characterized by a six-membered ring structure containing an oxygen atom.

Anomeric Carbon

The carbon atom in a carbohydrate molecule that was the carbonyl carbon before cyclization and is now attached to the oxygen of the hemiacetal or hemiketal group.