Question
Projects A and B have identical expected lives and identical initial cash outflows (costs), but their future cash flows are different. The future cash flows
Projects A and B have identical expected lives and identical initial cash outflows (costs), but their future cash flows are different. The future cash flows are such that, if we increase the required rate of return (r), the NPV of project A decreases faster than that of project B. What can we say about the future cash flows of the two projects?
A. | We must have more information to be able to say anything about cash flows. | |
B. | All of project B's future cash flows are larger than those of project A. | |
C. | More of Project A's cash flows occur in the later years. | |
D. | All of project A's future cash flows are larger than those of project B. | |
E. | More of Project B's cash flows occur in the later years. |
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