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.

Question

Quizplus · Accepted Answer

Project S, with faster incoming cash flows, will have a higher NPV at any positive discount rate because earlier cash flows are more valuable when discounted back to the present value.

Normal Projects S and L Have the Same NPV When