Business, 19.12.2019 01:31 samv6390

Suppose your boss has asked you to analyze two mutually exclusive projects - project a and project b. both projects require the same investment amount, and the sum of cash inflows of project a is larger than the sum of cash inflows of project b. a coworker told you that you do not need to do an npv analysis of the projects because you already know that project a will have a larger npv than project b. do you agree with your coworker's statement?

a. yes, project a will always have the largest npv, because its cash inflows are greater than project b's cash inflows.

b. no, the npv calculation will take into account not only the project's cash inflows but also the timing of cash inflows and outflows. consequently, project b could have a larger npv than project a, even though project a has larger cash inflows.

c. no, the npv calculation is based on percentage returns. so, the size of the project's cash flows does not affect a project's npv.

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