Which of the following statements is true for a project with a $20,000 initial cost, cash inflows of $5,800 per year for 6 years, and a discount rate of 15%?
A) Its payback period is 3.45 years.
B) Its NPV is $2,094.
C) Its IRR is 17.85%.
D)Its profitability index is 0.104.

Question

Quizplus · Accepted Answer

Payback = $20,000/$5,800 = 3.45 yearsNPV = -$20,000 + $5,800[(1/0.15) - 1/0.15(1.15)⁶] = $1,950PI = $1,950/$20,000 = .097Using a financial calculator:n = 6; PV = -$20,000; PMT = $5,800; FV = 0; CPT i = 18.56%

Which of the Following Statements Is True for a Project