An independent project should be accepted if it A. produces a net present value that is...
An independent project should be accepted if it
A. produces a net present value that is greater than or equal to zero.
B. produces a net present value that is greater than the equivalent IRR.
C. has only one sign reversal.
D. produces a profitability index greater than or equal to zero.
Homework Answers
NPV = -initial investment + PV of future cash flows
Present value = Future value/(1+i)^n
i = interest rate per period
n= number of periods
b) NPV is dollar amount and IRR is return, hence both are not comparable
c) Not a valid reason
d) PI should be greater than 1 for a project to be accepted
hence the correct answer is
A. produces a net present value that is greater than or equal to zero
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