Asked by
Roxanna Saenz
on Nov 08, 2024Verified
When the present value of the cash inflows exceeds the initial cost of a project, then the project should be:
A) Accepted because the internal rate of return is positive.
B) Accepted because the profitability index is greater than 1.
C) Accepted because the profitability index is negative.
D) Rejected because the internal rate of return is negative.
E) Rejected because the net present value is negative.
Profitability Index
An instrument in finance for assessing the attractiveness of a project or investment, which is found by dividing the current value of forthcoming cash flows by the initial cost of the investment.
Present Value
The valuation in today's terms of a prospective future sum of money or cash inflows, utilizing a particular return rate.
Initial Cost
The initial expenditure required to acquire an asset or to start a project, incorporating all necessary expenses to bring it to a usable state.
- Implement Net Present Value and Profitability Index guidelines in making investment decisions.
Verified Answer
SC
Learning Objectives
- Implement Net Present Value and Profitability Index guidelines in making investment decisions.