You are considering a project with the following data: Internal rate of return: 8.7%
Profitability ratio: 0.98
Net present value: -£393
Payback period: 2.44 years
Required return: 9.5%
Which one of the following is correct given this information?
A)The discount rate used in computing the net present value must have been less than 8.7%.
B)The discounted payback period will have to be less than 2.44 years.
C)The discount rate used to compute the profitability ratio was equal to the internal rate of return.
D)This project should be accepted based on the profitability ratio.
E)This project should be rejected based on the internal rate of return.

Question

Quizplus · Accepted Answer

Since the required return for this project is 9.5% and the internal rate of return is only 8.7%, it means that the project is not generating enough return to meet the required return. Therefore, this project should be rejected based on the internal rate of return.

You Are Considering a Project with the Following Data: Internal