Use the following statements to answer the question:
I.The IRR of a project that has a profitability index equal to 1 is equal to the risk-adjusted rate.
II.IRR and NPV results can be contradictory.

Question

Quizplus · Accepted Answer

I is correct because the profitability index (PI) of 1 indicates that the present value of future cash flows is equal to the initial investment, meaning the project's return is exactly the risk-adjusted rate, which is what IRR represents when PI is 1. II is correct because IRR and NPV can indeed give contradictory results, especially in cases of non-conventional cash flows or projects with different scales and timings of cash flows.

Use the Following Statements to Answer the Question