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

The project should be accepted because the profitability index is greater than 1, indicating that there is a positive net present value. This means that the present value of the cash inflows is greater than the initial cost of the project, making it profitable. The internal rate of return and net present value are also important factors to consider but they are not the best choices in this scenario.

When the Present Value of the Cash Inﬂows Exceeds the Initial