Assume a project has normal cash flows and a positive (non-zero)net present value.The project's
A)profitability index will be less than 1.
B)internal rate of return will exceed its required rate of return.
C)costs exceed its benefits.
D)discounted payback period will exceed the life of the project.
E)payback period must equal the life of the project.

Question

Quizplus · Accepted Answer

A project with a positive net present value means that the present value of inflows is greater than the present value of outflows. This also implies that the project's internal rate of return is greater than the required rate of return. Choice A is incorrect because the profitability index will be greater than 1. Choice C is incorrect because costs are less than benefits. Choice D is incorrect because the discounted payback period will be less than the life of the project. Choice E is also incorrect as the payback period does not need to equal the life of the project.

Assume a Project Has Normal Cash Flows and a Positive