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Question
Project A is expected to generate positive cash flow of $1 million in 10 years while Project B is expected to generate $500,000 in 5 years. ThereforeA) Project A is preferred because shareholder value is based on cash flow.
B) Project B is preferred because its cash flow is expected to be received sooner than the cash flow from Project A.
C) Both projects have equal value because they average $100,000 per year.
D) Project B may be preferred to Project A if the opportunity cost of money is high enough.
Answer
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