Which of the following statements is true for a project with a $20,000 initial cost,cash inflows of $6,667 per year for 6 years,and a discount rate of 15%?
A) Its payback period is 3 years.
B) Its NPV is $2,094.
C) Its IRR is 17.85%.
D) Its profitability index is 0.104.

Question

Quizplus · Accepted Answer

Payback = $20,000 / $6,667 = 3 yearsNPV = −$20,000 + $6,667[(1 / 0.15) − 1 / 0.15(1.15)⁶] = $5,231PI = $5,231 / $20,000 = 0.262IRR = 24.3%

Which of the Following Statements Is True for a Project