You are considering a project with conventional cash flows.The IRR is 12.6 percent,NPV is -$198,and the payback period is 2.87 years.Which one of the following statements is correct given this information?
A)The discount rate used in computing the net present value was less than 12.6 percent.
B)The discounted payback period will have to be less than 2.87 years.
C)The project life must be 2.87 years.
D)This project should be accepted based on the internal rate of return.
E)The required rate of return must be greater than 12.6 percent.

Question

Quizplus · Accepted Answer

Since the NPV is negative, the required rate of return must be greater than the IRR of 12.6 percent for the project to be viable. Therefore, E is the correct choice, and the other statement choices are all wrong.

You Are Considering a Project with Conventional Cash Flows