You are considering a project with the following data: IRR = 8.7 percent;PI = .98;NPV = -$393;Payback period = 2.44 years.Which one of the following statements is correct given this information?
A)The discount rate used in computing the net present value must have been less than 8.7 percent.
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)The required rate of return must be greater than 8.7 percent.

Question

Quizplus · Accepted Answer

The required rate of return must be greater than 8.7 percent because the NPV is negative, indicating that the IRR is less than the required rate of return.

You Are Considering a Project with the Following Data: IRR