At the current discount rate, the net present value of an 8-year project is zero.Assuming that the current discount rate and the annual cash flows are unchanged, identify which one of the following statements is true.

Question

Quizplus · Accepted Answer

If the net present value is zero at eight years, extending the project's life to 10 years will increase the present value of the annual cash flows beyond zero, making the project desirable. A shorter project life of 5 years would reduce the value of the annual cash flows, resulting in a more negative net present value, making the project less desirable. Therefore, option A is the correct choice.

At the Current Discount Rate, the Net Present Value of an 8-Year