For a particular investment project, the present value of the benefits is exactly equal to the present value of the investment. Given this, which of the following statements is true?
A) The net present value is positive
B) The internal rate of return is less than the required rate of return
C) The profitability index is less than one
D) The project is acceptable

Question

Quizplus · Accepted Answer

If the present value of the benefits is exactly equal to the present value of the investment, then the net present value is zero. However, since the question states that the benefits and investment are exactly equal, there is no negative NPV either. Therefore, the project is acceptable. The internal rate of return and profitability index cannot be determined without knowing more information about the project.

For a Particular Investment Project, the Present Value of the Benefits