Which of the following should be assumed about a project that requires a $100,000 investment at time-period zero, then returns $20,000 annually for five years?
A)The NPV is negative
B)The NPV is zero
C)The profitability index is 1.0
D)The IRR is zero

Question

Quizplus · Accepted Answer

The project requires a $100,000 investment upfront and only generates $20,000 annually for five years. Therefore, the total cash inflow over the five-year period is only $100,000 ($20,000 x 5). Since this is just breaking even, there would be no profit, and the NPV would be negative.

Which of the Following Should Be Assumed About a Project