Projects L and S each have an initial cost of $10,000, followed by a series of positive cash inflows. Project L has total, undiscounted cash inflows of $16,000, while
S has total undiscounted inflows of $15,000. Further, at a discount rate of 10 percent, the two projects have identical NPVs. Which project's NPV will be more sensitive to changes in the discount rate?
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A. B. C. D. E.E
The NPV profile plots a project's NPV against the discount rates. The higher the undiscounted inflows, the steeper the NPV profile, and the steeper the NPV profiles, the more sensitive the project is to discount rate changes.