You are considering a project with conventional cash flows and the following characteristics: $$\begin{array} { l l }
\text { Internal rate of return } & 11.63 \text { percent } \
\text { Profitability ratio } & 1.04 \
\text { Net present value } & \$ 987 \
\text { Payback period } & 2.98 \text { years }
\end{array}$$ 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 more 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: $$\begin{array} { l l } 
\text { Internal rate of return } & 11.63 \text { percent } \
\text { Profitability ratio } & 1.04 \
\text { Net present value } & \$ 987 \
\text { Payback period } & 2.98 \text { years }
\end{array}$$ 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 more 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

The NPV is positive, indicating the discount rate was less than the IRR of 11.63%. The discounted payback period is longer than the regular payback period. The IRR exceeding the required return suggests the project should be accepted.

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