- 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.
Financial Management MCQ - Financial Management Section 3
- 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.
