You are considering two projects with the following cash flows: $\begin{array}{lcc}
&ProjectA&ProjectB\\
\text { Year 1 } & £ 2,500 & £ 4,000 \\
\text { Year 2 } & 3,000 & 3,500 \\
\text { Year 3 } & 3,500 & 3,000 \
& & \
\text { Year 4 } & 4,000 & 2,500
\end{array}$ Which of the following statements are true concerning these two projects?
i.Both projects have the same future value at the end of year 4,given a positive rate of return.II.Both projects have the same future value given a zero rate of return.III.Both projects have the same future value at any point in time,given a positive rate of return.IV.Project A has a higher future value than project B,given a positive rate of return.

Question

Quizplus · Accepted Answer

With a zero rate of return, the future value is simply the sum of the cash flows. Both projects have the same total cash flow (£13,000) over the four years, so they have the same future value with a zero rate of return.

You Are Considering Two Projects with the Following Cash Flows