SOLUTION:
Option (A) Profitability index greater than 1.0
The Profitability index rule says that any project that has a ratio above 1 is said to be profitable project.
Which one of the following indicates that a project is definitely acceptable? A. Profitability index greater than...
Which one of the following indicates that a project should be rejected? O1) Payback period that is shorter than the requirement period 2) Negative net present value 3) Internal rate of return that exceeds the required return 4) Profitability index is greater than 1.0 5) Positive net present value
17. If the profitably index for a project exceeds 1, then the project's net present value is positive a. b. internal rate of return is less than the projects's disount rate. payback period is less than 5 years. d. c. Accounting rate of return is greater than the project's rate of return. 18. If a project's profitability index is less than 1, the project's a. discount rate is above its cost of capital. b. Internal rate of return is less...
Which one of the following statements is correct? Assume cash flows are conventional. Explain how you got your answer A. If two projects are mutually exclusive, you should select the project with the shortest payback period. B. The profitability index will be greater than 1.0 when the net present value is negative. C. Projects with conventional cash flows may sometimes have multiple internal rates of return. D. If the required return exceeds IRR, the profitability index will be less than...
18. Which of the following is NOT true about the internal rate of return: A) A good project is one with IRR greater than the required return. B) IRR is the discount rate that results in a zero net present value for the project. C) Crossover rate for two projects is the IRR of the project with the difference of the cash flows of the two projects.. D) For two projects of the same size, IRR will usually choose the...
A project should be accepted when the: Select one: a. Payback period is greater than the prescribed number of years. O b. IRR exceeds the required rate. O c. Net present value is negative. O d. AAR is less than the targeted AAR. Oe. Profitability index is less than 1.0.
(2. Which one of the following can be defined as the NPV in percentage terms? A. Profitability index B. Internal rate of return C. Net present value D. Accounting rate of return E. Modified internal rate of return
Which one of the following statements is not true regarding the profitability index (PI)? (1) The PI expresses the present value of an investment as a ratio of the initial investment (2) If the present value of future cash flows is less than the initial investment, then the PI will be less than 1. (3) The PI quantities how much a project is expected to earn for every Rl invested in the project. (4) A negative value for Pl is indicative of an unprofitable...
A project with an initial investment of $90,000 and a profitability index of 1.510 also has an internal rate of return of 10%. The present value of the net cash flows is:
Splash City is considering purchasing a water park in Atlanta, Georgia, for $1,910,000. The new facility will generate annual net cash inflows of $472,000 for eight years. Engineers estimate that the facility will remain useful for eight years and have no residual value. The company uses straight-line depreciation, and its stockholders demand an annual return of 10% on investments of this nature. Requirement 1. Compute the payback, the ARR, the NPV, the IRR, and the profitability index of this investment....
If a project costing $40000 has a profitability index of 1 and the discount rate was 15%, then the project’s internal rate of return was less than 15%. equal to 15%. greater than 15%. undeterminable.