Suppose you have a project whose discounted payback is equal to its termination date. What can you say for sure about its PI?
A) The discounted payback will be greater than zero.
B) It will have a PI and NPV of zero.
C) The NPV and IRR will yield the same decision.
D) The IRR will just equal the cost of capital.

Question

Quizplus · Accepted Answer

If the discounted payback period is equal to the project's termination date, it means the present value of cash inflows equals the initial investment, resulting in a Net Present Value (NPV) of zero. Consequently, the Profitability Index (PI), which is the ratio of the present value of cash inflows to the initial investment, will also be zero.

Suppose You Have a Project Whose Discounted Payback Is Equal