You are considering a project with conventional cash flows and the following characteristics: Which of the following statements is correct given this information?
I. The discount rate used in computing the net present value was less than 11.63 percent.
II. The discounted payback period must be less than 2.98 years.
III. The discount rate used in the computation of the profitability ratio was 11.63 percent.
IV. This project should be accepted as the internal rate of return exceeds the required return.
A)I and II only
B)III and IV only
C)I, II, and IV only
D)II, III, and IV only
E)I, II, III, and IV

Question

You are considering a project with conventional cash flows and the following characteristics:  Which of the following statements is correct given this information?
I. The discount rate used in computing the net present value was less than 11.63 percent.
II. The discounted payback period must be less than 2.98 years.
III. The discount rate used in the computation of the profitability ratio was 11.63 percent.
IV. This project should be accepted as the internal rate of return exceeds the required return.
A)I and II only 
B)III and IV only 
C)I, II, and IV only 
D)II, III, and IV only 
E)I, II, III, and IV

Quizplus · Accepted Answer

I. This statement is correct as the NPV of the project is positive, therefore the discount rate used must have been less than the project's required rate of return of 11.63%.
II. This statement is correct as the discounted payback period is shown to be less than 2.98 years.
III. This statement is incorrect as the profitability ratio is not given in the information provided.
IV. This statement is correct, as the internal rate of return exceeds the required return of 11.63%, indicating that the project is expected to generate a rate of return higher than the cost of capital.

You Are Considering a Project with Conventional Cash Flows and the Following