You are considering a project with the following data:
$\begin{array} { l l } \text { Internal rate of return: } & 8.7 \% \ \text { Profitability ratio: } & 0.98 \ \text { Net present value: } & - £ 393 \ \text { Payback period: } & 2.44 \text { years } \ \text { Required return: } & 9.5 \% \end{array}$
Which one of the following is correct given this information?
A)The discount rate used in computing the net present value must have been less than 8.7%.
B)The discounted payback period will have to be less than 2.44 years.
C)The discount rate used to compute the proﬁtability ratio was equal to the internal rate of
Return.
D)This project should be accepted based on the proﬁtability ratio.
E)This project should be rejected based on the internal rate of return.

Question

Quizplus · Accepted Answer

The internal rate of return (IRR) is 8.7%, which is lower than the required return of 9.5%. This means the project's return does not meet the minimum threshold set by the required return, leading to the conclusion that the project should be rejected based on the IRR criterion.

You Are Considering a Project with the Following Data Which One of the Following Is Correct Given This Information