17. If the profitably index for a project exceeds 1, then the project\'s net pre

Question

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 than zero. c. Payback period is infinite. d. Net present value is negative

Explanation / Answer

Answer to Question No. 17

Option a i.e. Net Present Value is Positive.

Profitability Index is calculating by dividing Present Value of Cash Inflow by Present Value of Cash outflow. Profitability Index of more than 1 indicates, the Present Value of Cash Inflow is more than the Present Value of Cash Outflow.

The excess of Present value of cash inflow over present value of cash outflow also indicates that Net Present Value is positive, because the NPV is excess of PV of Cash Inflow over PV of Cash Outflow.

Answer to Question No. 18

Option d i.e. Net Present Value is negative.

Profitability Index is calculating by dividing Present Value of Cash Inflow by Present Value of Cash outflow. Profitability Index of less than 1 indicates, the Present Value of Cash outflow is more than the Present Value of Cash Inflow.

A shot of Present value of cash inflow over present value of cash outflow also indicates that Net Present Value is negative, because the NPV is excess of PV of Cash Inflow over PV of Cash Outflow.

Related Questions

Navigate

• Browse (All)
• Browse 1
• Subjects

---

---

Integrity-first tutoring: explanations and feedback only — we do not complete graded work. Learn more.