If a project with conventional cash ﬂows has a proﬁtability index less than one, then:
A) The IRR is greater than the required return.
B) The discounted payback period is greater than the project's life.
C) The AAR is greater than the required return.
D) The payback period is less than the maximum acceptable period.
E) The NPV is positive.

Question

Quizplus · Accepted Answer

A proﬁtability index less than one indicates that the present value of cash inflows is less than the present value of cash outflows, which means that the discounted payback period is greater than the project's life.

If a Project with Conventional Cash ﬂOws Has a Proﬁtability