Which one of the following is an indicator that an investment is acceptable?
A)a modified internal rate of return equal to zero
B)a profitability index of zero
C)an internal rate of return that exceeds the required return
D)a payback period that exceeds the required period
E)a negative average accounting return

Question

Quizplus · Accepted Answer

An investment is considered acceptable if its internal rate of return (IRR) exceeds the required return. The IRR is the discount rate that makes the net present value of the investment equal to zero, and if it is higher than the required return, it means that the investment will generate a positive NPV and will be profitable. Option A (modified IRR equal to zero) and option B (profitability index of zero) both indicate that the investment will not generate a positive return, and options D and E (payback period and average accounting return) do not consider the time value of money and do not provide a comprehensive measure of the profitability of the investment.

Which One of the Following Is an Indicator That an Investment