Question: Suppose you consider 2 mutually exclusive projects A and B. Both projects have conventional cash flows and identical initial investments. Project A has cash flows

Suppose you consider 2 mutually exclusive projects A and B. Both projects have conventional cash flows and identical initial investments. Project A has cash flows that gradually increase from one period to the next, while cash flows of project B gradually decline. Both projects have the same duration. Given current discount rate, both projects have the same NPV. Alan Greenspan will decrease interest rate next week, which will decrease the discount rate.

Which project will likely have higher NPV if, indeed, discount rate decreases?

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