Which One of the Following Statements Is Correct

question 91

Multiple Choice

Which one of the following statements is correct?

• A)If the IRR exceeds the required return, the profitability index will be less than 1.0.
• B)The profitability index will be greater than 1.0 when the net present value is negative.
• C)When the internal rate of return is greater than the required return, the net present value is positive.
• D)Projects with conventional cash flows have multiple internal rates of return.
• E)If two projects are mutually exclusive, you should select the project with the shortest payback period.

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Definitions:

Marginal Product

This measures the additional output that is produced by adding one more unit of a specific input, keeping all other inputs constant.

Total Output

The entire quantity of goods or services produced by an individual, firm, industry, or economy within a specified period.

Implicit Costs

Costs that represent the value of resources used in production for which no direct payment is made.

Explicit Costs

Direct, out-of-pocket payments a firm makes to purchase the inputs it needs for production, such as wages, rent, and materials.