Question

If a project with conventional cash flows has a profitability index equal to one, the project:

Answer 1

Explanation:

Answer and Explanation:

If a project with conventional cash flows has a profitability index of 1.0, the project will:

5) have an internal rate of return that equals the required return.

When profitability ratio is 1, this means that the present value of future cash inflows equals the present value of all cash outflows. At this point NPV is zero and hence IRR equals the rate of required return.

1) never pay back. - The project pays back at the end of the life.

2) have a negative net present value. - Has a zero NPV.