When the Present Value of the Cash Inflows Exceeds the Initial

question 104

Multiple Choice

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.

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Definitions:

Tender

An offer to perform an obligation or a formal offer, especially in the context of a bid for a project or to fulfill contractual requirements.

Performance

The act of fulfilling the terms of a contract, agreement, or obligation.

Contractual Obligations

are responsibilities or duties that are legally binding and arise from agreements or contracts entered into by parties.

Implied Condition

A condition that is not specifically and explicitly stated but is inferred from the nature and language of the contract.