Question 218 NPV, IRR, profitability index, average accounting return
Which of the following statements is NOT correct?
(a) If a project has a positive NPV, its Profitability Index (PI) will be more than 1.
(b) If a project has a negative NPV and the discount rate is zero, then the payback period will be infinite so the project will never pay back its costs.
(c) If a project's NPV is zero, then the PI must be 1.
(d) If a project has a negative NPV, its IRR will be negative.
(e) If a project has a positive NPV, its Average Accounting Return (AAR) is not necessarily positive, it could be positive, negative or zero.
Copyright © 2014 Keith Woodward