When the present value of the cash inflows exceeds the initial cost of a project, then the project should be:
A) Accepted because the internal rate of return is positive.
B) Accepted because the profitability index is greater than 1.
C) Accepted because the profitability index is negative.
D) Rejected because the internal rate of return is negative.
E) Rejected because the net present value is negative.

Question

Quizplus · Accepted Answer

When the present value of cash inflows exceeds the initial cost of a project, it means the project generates a return greater than the cost, leading to a profitability index greater than 1, indicating the project is financially viable and should be accepted.

When the Present Value of the Cash Inflows Exceeds the Initial