An independent project has conventional cash flows and a positive net present value. It can be stated with certainty that the project is acceptable according to the capital budgeting technique known as:
A) Payback.
B) Discounted payback.
C) The accounting rate of return.
D) The crossover method.
E) The internal rate of return.

Question

Quizplus · Accepted Answer

A project with conventional cash flows (initial outlay followed by positive cash inflows) and a positive net present value (NPV) indicates that the present value of its future cash flows exceeds its initial investment. This means the project's internal rate of return (IRR) is higher than the discount rate used in the NPV calculation, making it acceptable according to the IRR method. The IRR method evaluates investments by finding the rate that makes the NPV of all cash flows from the investment equal to zero. If the IRR exceeds the cost of capital, the project is considered acceptable.

An Independent Project Has Conventional Cash Flows and a Positive