Question

Which one of the following indicates a project has a required return that exceeds its rate of return?
a. a positive NPV
b. a payback period that exceeds the required period
c. a PI more than 1.0
d. a negative accounting rate of return
e. A negative NPV

Answer 1

Answer:

a        ( a positive Net present Value)

Explanation:

Internal rate of return is the interest rate at which the NPV of all inflows or outflows are calculated usually EQUAL ZERO. When the resultant NPV from a project is positive; it means that the rate of return used exceeds the project's internal rate of return. NPV are usually used to determine project's viability or if projects should be discontinued or embarked on. It is one of the relevant tools used by cost accountants or management accountants to determine viability of projects.