Question

PLEASE PAY ATTENTION TO THIS QUESTION.. I AM STUCK BETWEEN A AND C.

Question 21

An independent project should be accepted if it

		produces a net present value that is greater than the equivalent IRR.
		produces a profitability index greater than or equal to zero.
		has an IRR greater than zero.
		produces a net present value that is greater than zero.

Question 14

The APR of not taking advantage of the 1/10, net 90 terms offered by a supplier is

		18.18%.
		4.55%.
		7.27%.
		10.39%.

Answer 1

21. Option d is correct option produces a net present value that is greater than zero. because if NPV is greater than 0 then it increases value of the firm.

Option a is incorrect because for a project to be accepted cost of capital should be less than IRR.

Option b is incorrect because profitability index should be more than 1 for a project to be accepted.

Option c is incorrect because IRR should be greater than cost of capital and not zero for project to be accepted.

22. APR cost of Trade discount = Discount/(100 -discount) * 360/( days of credit - discount period )
=1%/(100-1%) * 360/(90 - 10) = 1/99 * 365/80 = 4.55%

Option b is correct option