Which one of the following is a project acceptance indicator given an independent project with investing type cash flows?
A) Profitability index that is less than 1.0
B) Project's internal rate of return that is less than the required return
C) Discounted payback period that is greater than the required return
D) Average accounting return that is less than the internal rate of return
E) Modified internal rate of return that exceeds the required return

Question

Which one of the following is a project acceptance indicator given an independent project with investing type cash flows? 
A) Profitability index that is less than 1.0 
B) Project's internal rate of return that is less than the required return 
C) Discounted payback period that is greater than the required return 
D) Average accounting return that is less than the internal rate of return 
E) Modified internal rate of return that exceeds the required return

Quizplus · Accepted Answer

The Modified Internal Rate of Return (MIRR) that exceeds the required return is an acceptance indicator when considering an independent project with investing type cash flows. MIRR is a modified version of IRR that assumes the reinvestment of cash flows at the required rate of return instead of the project's own rate of return. By selecting projects that have a higher MIRR than the required return, the investor can ensure that the project generates enough cash flows to cover the required rate of return and compensate for the opportunity cost of investing in the project.

Which One of the Following Is a Project Acceptance Indicator