Business Finance - Business Finance Section 2
26. Which of the following statements is correct?
- A
If the NPV of a project is greater than 0, its PI will equal 0.
- B
If the IRR of a project is 0%, its NPV, using a discount rate, k, greater than 0, will be 0.
- C
If the PI of a project is less than 1, its NPV should be less than 0.
- D
If the IRR of a project is greater than the discount rate, k, its PI will be less than 1 and its NPV will be greater than 0.
- A
calculate the IRR of this investment to be certain that the IRR is greater than the cost of capital.
- B
compare the profitability index of the investment to those of other possible investments.
- C
calculate the payback period to make certain that the initial cash outlay can be recovered within an appropriate period of time.
- D
accept the proposal, since the acceptance of value-creating investments should increase shareholder wealth.
