If the present value payback period is less than the life of the project, one may conclude that:
A)The project's internal rate of return (IRR) is less than the discount (hurdle) rate.
B)The project's accounting (book) rate of return exceeds the discount (hurdle) rate.
C)The project is not desirable in a present-value sense.
D)The project's net present value (NPV) is positive.
E)The project's IRR is equal to the weighted-average cost of capital.

Question

Quizplus · Accepted Answer

If the present value payback period is less than the life of the project, it means that the project generates enough cash flows to recover its initial investment within its lifetime. This implies that the project has a positive net present value (NPV) since the present value of its cash inflows is greater than the present value of its initial investment. Therefore, option D is the correct choice. Options A, B, and E do not necessarily hold true based on the given information, and option C is incorrect.

If the Present Value Payback Period Is Less Than the Life