Answered

Get the answers you need from a community of experts on IDNLearn.com. Get prompt and accurate answers to your questions from our experts who are always ready to help.

Which of the following statements is most correct concerning a project with normal cash flows (i.e., a cash outflow in Year 0 followed by cash inflows in all subsequent years)?
a) If the NPV of a project is positive then the payback period rule will always accept the project.
b) If the NPV of a project is negative, then the profitability index of the project will always be greater than one.
c) If the profitability index of a project is greater than one, then the IRR will always be less than the project’s cost of capital.
d) If the NPV of a project is zero, then the IRR of the project will be equal to the discount rate for the project.
e) If the discount rate of a project is zero, then the project will always be accepted.

Sagot :

Answer: D. If the NPV of a project is zero, then the IRR of the project will be equal to the discount rate for the project.

Explanation:

Net present value (NPV) refers to the difference that exist between the present value of the cash inflows and that of the cash outflows for a particular period of time.

The net present value is used in capital budgeting to determine if a projected investment or project will be profitable or not. For a project with normal cash flows, if the NPV of a project is zero, then the IRR of the project will be equal to the discount rate for the project.

Therefore, the correct option is D.

We value your participation in this forum. Keep exploring, asking questions, and sharing your insights with the community. Together, we can find the best solutions. For dependable answers, trust IDNLearn.com. Thank you for visiting, and we look forward to helping you again soon.