Problem 1 [40 points] Explain whether each of the following statements is True or False. Provide a short explanation. (A) (5 points) Project A has high cash flows in its early life but Project B has large cash flows late in its life. At the current discount rate they have the same NPV. If interest rates fall Project B will be preferred to A. (B) (5 points) Increasing the discount rate will INVARIABLY result in a reduction in the NPV of a project. (C) (5 points) At a discount rate of zero the NPVs of two projects are the same. However, this fact tells us nothing about the actual cash flows of the projects themselves. (D) (5 points) As the NPV calculation assumes reinvestment at the discount rate and the IRR criterion assumes reinvestment at the IRR, it is impossible that both criteria will involve assuming that funds are reinvested at the SAME rate. (E) (5 points) A project with cash flows occurring late in its life is more likely to be rejected as interest rates rise than one with early cash inflows. (F) (5 points) Increasing the discount rate of a certain project decreases its NPV so the project MUST have an IRR as, eventually, the NPV must reach zero. (G) (5 points) The NPV of a conventional project decreases as the discount rate increases but it decreases at a decreasing rate. (H) (5 points) As the IRR of a project does not change as the interest rate changes, it is a