American_Bankers_Association
CTFA · Question #291
Which of the following statements is correct?
The correct answer is C. If the PI of a project is less than 1, its NPV should be less than 0. See the full explanation below for the reasoning.
Investment Management
Question
Which of the following statements is correct?
Options
- AIf the NPV of a project is greater than 0, its PI will equal 0
- BIf the IRR of a project is 0%, its NPV, using a discount rate, k, greater than 0, will be 0
- CIf the PI of a project is less than 1, its NPV should be less than 0
- DIf the IRR of a project is greater than the discount rate, k, its PI will be less than 1 and its NPV will
How the community answered
(31 responses)- A3% (1)
- B6% (2)
- C81% (25)
- D10% (3)
Topics
#NPV#profitability index#IRR#capital budgeting relationships
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