If a project costing $40,000 has a profitability index of 1.00 and the discount rate was 8%, then the project's internal rate of return was
A) less than 8%.
B) equal to 8%.
C) greater than 8%.
D) undeterminable.

Question

Quizplus · Accepted Answer

A profitability index of 1.00 indicates that the present value of the future cash inflows is equal to the initial investment. Since the discount rate was 8% and the project has a profitability index of 1.00, the internal rate of return must also be 8%.

If a Project Costing $40,000 Has a Profitability Index of 1.00