Which one of the following statements is correct given the following two sets of

Question

Which one of the following statements is correct given the following two sets of project cash flows?

Project A Project B
Year 1 $6,000 $2,000
Year 2 $ 0 $3,000
Year 3 $2,500 $3,000
Year 4 $2,500 $3,000

A. The cash flows for Project B are an annuity, but those of Project A are not.
B. Both sets of cash flows have equal present values as of time zero given a positive discount rate
C. The present value at time zero of the final cash flow for Project A will be discounted using an exponent of three
D. The present value of Project A cannot be computed because the second cash flow is equal to zero
E. As long as the discount rate is positive, Project B will always be worth less today than will Project A

Explanation / Answer

D. The present value of Project A cannot be computed because the second cash flow is equal to zero

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