The NPV of project A is 100 million USD using a social discount rate of 3%....

 

Transcribed Image Text:

The NPV of project A is 100 million USD using a social discount rate of 3%. The NPV was calculated over 30 years, assumed life-time of the project. A project evaluator argues that the project's life time should be extended by another 3 years based on the NPV criterion. expected cash flows in constant prices in the extra 3 years are below: Benefits (Emillions) Costs (Emillions) Extra year 1 5 6 Extra year 2 5 4 Casel: The internal rate of retum of this project will be higher than 3%. Case 2: The project evaluator is wrong. a) CASE 1 & CASE 2 = TRUE b) CASE 1 & CASE 2 = FALSE c) CASE 1 = FALSE & CASE 2 = TRUE d) CASE 2=FALSE & CASE 1=TRUE Extra year 3 5 3 O The NPV of project A is 100 million USD using a social discount rate of 3%. The NPV was calculated over 30 years, assumed life-time of the project. A project evaluator argues that the project's life time should be extended by another 3 years based on the NPV criterion. expected cash flows in constant prices in the extra 3 years are below: Benefits (Emillions) Costs (Emillions) Extra year 1 5 6 Extra year 2 5 4 Casel: The internal rate of retum of this project will be higher than 3%. Case 2: The project evaluator is wrong. a) CASE 1 & CASE 2 = TRUE b) CASE 1 & CASE 2 = FALSE c) CASE 1 = FALSE & CASE 2 = TRUE d) CASE 2=FALSE & CASE 1=TRUE Extra year 3 5 3 O

Answer rating: 100% (QA)

Sal To answer the present case study CASE1 Cafe 2 should be evaluated whether it is True or false Ev... View the full answer