If a Company Has Computed the Project Profitability Index of an Investment

question 61

Multiple Choice

If a company has computed the project profitability index of an investment project as 0.15,then:

• A)the project's internal rate of return is less than the discount rate.
• B)the project's internal rate of return is greater than the discount rate.
• C)the project's internal rate of return is equal to the discount rate.
• D)the relation between the rate of return and the discount rate is impossible to determine from the given data.

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Definitions:

Remeasurement Gain or Loss

A financial result that occurs when the value of a foreign currency transaction is adjusted to reflect exchange rate changes at the balance sheet date.

Parent Company

A corporation that owns enough voting stock in another firm to control management and operations by influencing or electing its board of directors.

Financial Statements

Formal records of the financial activities and position of a business, person, or other entity, vital for making financial decisions.

Highly Inflationary Economy

An economic environment characterized by rapid and excessive price increases, affecting purchasing power.