If a Project with Conventional Cash Flows Has a Profitability

question 3

Multiple Choice

If a project with conventional cash flows has a profitability index of 1.0, the project will:

• A)never pay back.
• B)have a negative net present value.
• C)have a negative internal rate of return.
• D)produce more cash inflows than outflows in today's dollars.
• E)have an internal rate of return that equals the required return.

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Definitions:

Semiannually

Occurring or done twice a year, typically every six months.

Face Value

The nominal or dollar value printed on a security or a financial instrument representing its value as stated by the issuer.

Interest Expense

The financial charge for the use of borrowed funds that an entity experiences over time.

Current Year

Refers to the present calendar year or fiscal year in which transactions and events are being recorded or reported.