Which One of the Following Is an Indicator That an Investment

question 54

Multiple Choice

Which one of the following is an indicator that an investment is acceptable? Assume cash flows are conventional.

• A)Modified internal rate of return that is equal to zero
• B)Profitability index of zero
• C)Internal rate of return that exceeds the required return
• D)Payback period that exceeds the required period
• E)Negative average accounting return

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Definitions:

Payment Stream

A series of two or more payments required by a single transaction or contract.

Obligation

A legal or moral duty to do something or pay something, often within the context of contracts and agreements.

Compounded Semi-Annually

Involves calculating the addition of interest to the principal sum of a loan or deposit on a half-yearly basis, incrementally increasing the amount earned or owed.

Payment Stream

A series of payments made over a period of time, often in the context of loans or annuities.