Projects A and B have identical expected lives and identical initial cash outflo

Question

Projects A and B have identical expected lives and identical initial cash outflows (costs). However, most of one projects cash flows come in the early years, while most of the other projects cash flows occur in the later years.
Which of the following statements is CORRECT?
a. More of Project As cash flows occur in the later years.
b. More of Project Bs 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 projects IRR

There is no word limit. Please. write the explanation. Thank you

Explanation / Answer

Answer is a . More of Project A’s cash flows occur in the later years. Reason being, as the cost of capital increases, the npv of project A falls at a faster pace than that of project B. Larger cash flows at then end of the period means that it is discounted even more and when that happens, the npv of the project falls to a greater extent when compared with the project that has higher cash flows at the beginning of the period.

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