Suppose a riskless project requires an initial investment of $10 and will generate a one-time cash inflow of $30 two years later. assuming a risk-free interest rate of 5%, which of the following statements about the project is not true?
a. the net present value of the project is positive. b. the irr is greater than 50 percent. c. the accounting rate of return on the project is positive. d. the payback period is less than 2 years.

D. The payback period is less than 2 years.

Explanation:

Discount rate                 5%  

                                        0      1          2

intital investment        -10  

cash flow                       0        30

Total cash flow         -10      0        30

NPV                        17.21  

IRR                                 73%  

Therefore, The NPV is 17.21 and is positive, the statement is True.

IRR > 50%, Therefore the statement made is True

Accounting rate of return = {[(30 - 10)/10]^(1/2)} - 1

                                           = 41% > 0

Therefore, The statement made is true.

Payback period = 2 years, Therefore the statement made is NOT true.

you get one warning and if you do something to violate the guidelines of after that you get kicked off.

mark as