You Are Considering an Investment Project with an Internal Rate

question 43

Multiple Choice

You are considering an investment project with an internal rate of return of 8.7 percent,a net present value of $393,and a payback period of 2.44 years.Which one of the following is correct given this information?

• A)The discount rate used in computing the net present value was less than 8.7 percent.
• B)The discounted payback period will be less than 2.44 years.
• C)The discount rate used to compute the net present value is equal to the internal rate of return.
• D)The required payback period must be greater than 2.44 years.
• E)This project should be rejected based on the net present value.

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Definitions:

Inflation

The rate at which the cost of goods and services across the board escalates, leading to a fall in the buying power of currency.

Living Standards

The volume of capital, pleasantries, commodities, and indispensable resources available to a defined economic group or territorial area.

Market Economy

is an economic system in which supply and demand from consumers direct the production of goods and services.

Socially Desirable Outcome

An economic or social condition that benefits the majority of the community, considering factors like efficiency, equity, and the welfare of all participants.