A project has a discounted payback period that is equal to the required payback period.Given this,which of the following statements must be true?
I.The project must also be acceptable under the payback rule.
II.The project must have a profitability index that is equal to or greater than 1.0.
III.The project must have a zero net present value.
IV.The project's internal rate of return must equal the required return.
A)I only
B)I and II only
C)II and III only
D)I, III, and IV only
E)I, II, III, and IV

Question

Quizplus · Accepted Answer

If a project has a discounted payback period that is equal to the required payback period, it means that the project's cash inflows are sufficient enough to cover the initial investment within the required time frame. Therefore, the project is acceptable under the payback rule (Statement I is true). However, it does not necessarily mean that the project has a zero net present value or that its internal rate of return is equal to the required return (Statements III and IV are not necessarily true). The project's profitability index is not mentioned, so it could be greater or less than 1.0 (Statement II is not necessarily true). Therefore, the best choice is B, as it includes the only statement that is necessarily true in this scenario (Statement I) and a statement that could be true (Statement II).

A Project Has a Discounted Payback Period That Is Equal