You Are Considering a Project with the Following Data: Internal

question 105

Multiple Choice

You are considering a project with the following data: Internal rate of return 8.7%
Profitability ratio .98
Net present value -$393
Payback period 2.44 years
Required return 9.5%
Which one of the following is correct given this information?

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

---

Definitions:

Initial Investment

The upfront cash outlay required to start a project or investment.

Cash Inflows

Cash inflows refer to the money received by a business from its operational, financing, and investing activities.

IRR

A financial indicator known as the Internal Rate of Return is used in capital budgeting to assess the expected gains of future investments.

Project Cost

The total financial expenditure required to complete a project, encompassing all charges and expenses.