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:

Flotation Costs

The complete expenses a company faces while issuing new securities, such as fees for underwriting, legal matters, and registration.

Cash Flows

The total amount of money being transferred into and out of a business, particularly considered when assessing its liquidity.

Cash Budget

An estimation of the cash inflows and outflows for a business or individual for a specific period, used for managing liquidity and financial planning.

Working Capital Policy

A company's strategy concerning managing its current assets and liabilities to ensure it has sufficient liquidity to meet its short-term obligations.