If a Project Has a Cost of $50,000 and a Profitability

question 77

Multiple Choice

If a project has a cost of $50,000 and a profitability index of 0.4,then:

• A) its cash inflows are $70,000.
• B) the present value of its cash inflows is $30,000.
• C) its IRR is 20%.
• D)its NPV is $20,000.

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Definitions:

Treasury Bill

Short-term, government-issued debt securities that mature in one year or less.

Par

The face value of a bond or other security, which is the amount the issuer promises to repay at maturity.

Dollar-Weighted Return

A measure of an investment's return, taking into account the timing and size of cash flows into and out of the investment.

Internal Rate of Return

An estimate of the profitability of potential investments, calculated as the rate of return that sets the net present value of all cash flows (both positive and negative) from the investment equal to zero.