Question
8. (6 points) Consider two projects with the following cash flow: Year Project A Project B 1 800 960 2 820 900 3 900 820
8. (6 points) Consider two projects with the following cash flow:
Year Project A Project B
1 800 960
2 820 900
3 900 820
4 960 800
Provide a one-line proof for each of the following TRUE/FALSE? statements:
a) At 10% per year, both Projects have cash flow equivalent to a 4-year annuity that gives 880 per year.
b) Given a positive interest rate, the future value of Project B is higher than that of Project A.
c) If the payback period method rejects Project A, it would also reject Project B.
d) If the payback period method accepts Project B, it would also accept Project A.
e) Given a positive interest rate, the future value (at year 4) of Project B is higher than Project A but the present value (year 0) of Project A is higher than Project B.
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