When the present value of the cash inﬂows exceeds the initial cost of a project, then the project should be:
A)accepted because the internal rate of return is positive.
B)accepted because the proﬁtability index is greater than 1.
C)accepted because the proﬁtability index is negative.
D)rejected because the internal rate of return is negative.
E)rejected because the net present value is negative.

Question

Quizplus · Accepted Answer

When the present value of the cash inflows exceeds the initial cost of a project, it means the project's net present value (NPV) is positive. This scenario directly leads to a profitability index greater than 1, indicating the project is expected to generate more value than its cost, hence should be accepted.

When the Present Value of the Cash Inﬂows Exceeds the Initial