Use the Following Statements to Answer the Question

question 80

Multiple Choice

Use the following statements to answer the question:
I.The IRR of a project that has a profitability index equal to 1 is equal to the risk-adjusted rate.
II.IRR and NPV results can be contradictory.

• A)I and II are correct.
• B)I and II are incorrect.
• C)I is correct and II is incorrect.
• D)I is incorrect and II is correct.

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Definitions:

Present Value

Present Value is the current worth of a future sum of money or stream of cash flows given a specified rate of return.

Earnings Rate

The return on an investment or project expressed as a percentage of the cost, often used to measure profitability.

Present Value Factor

A multiplier used to determine the present value of a future cash flow, taking into account a specific discount rate.

Annuity

An investment vehicle providing a constant flow of payments to the owner, usually utilised as a source of income for retired people.