Which of the Following Statements Is True for a Project

question 13

Multiple Choice

Which of the following statements is true for a project with $20,000 initial cost, cash inflows of $5,800 per year for six years, and a discount rate of 15 percent?

• A)Its payback period is roughly 3 1/2 years
• B)Its NPV is $2,194
• C)Its IRR is 1.85 percent
• D)Its profitability index is 0.109

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Definitions:

Total Income

The aggregate amount of money earned or received by an individual or entity from all sources before any deductions.

Equality-Efficiency Trade-Off

The compromise between ensuring an equitable distribution of resources and reaching the highest level of economic efficiency.

Economic Efficiency

A measure of how well resources are allocated to maximize the production of goods and services.

Income Distribution

The way in which total income is divided among the population or different groups within society.