Question

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Answer 1

Option 1 is right

Project A has larger cash flows in early years due to which the NPV is higher at all cost of capital. Hence the Project A has smaller cash flows in later years. Option 2 is incorrect since if the cash flows are larger in later years, it will have lower NPV. Option 3 is incorrect since NPV profiles will have the same result and cost of capital is not required to predict which project has larger cash flowsin earlier years.