Assume a Project Has Normal Cash Flows

question 54

Multiple Choice

Assume a project has normal cash flows.According to the accept/reject rules,the project should be accepted if the

• A)PI is less than 1.
• B)AAR is less than the required AAR.
• C)IRR exceeds the required return.
• D)payback period is less than the life of the project.
• E)discounted payback period is less than the life of the project.

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Definitions:

Compounded Semi-Annually

A method of calculating interest in which the accrued interest is added to the principal sum biannually, leading to "interest on interest."

Monthly Payments

Payments made once a month, often as part of a loan or rental agreement.

Borrow

To receive something of value with the promise to return it or its equivalent value at a later date.

Compounded Semi-Annually

A method of calculating interest where the interest is added to the principal twice a year, leading to interest on interest.