ANS to Essay Questions in Ch 9 - Essay Questions 100 The profitability index(PI of a project is 1.0 What do you know about the project's net present

ANS to Essay Questions in Ch 9 - Essay Questions 100 The...

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Essay Questions 100. The profitability index (PI) of a project is 1.0. What do you know about the project's net present value (NPV) and its internal rate of return (IRR)? 101. Explain how the internal rate of return (IRR) decision rule is applied to projects with financing type cash flows. For financing type projects, the decision rule is reversed so that projects are accepted when the project's IRR is less than the required rate of return and rejected when the project's IRR is greater than the required return. 102. Explain the differences and similarities between net present value (NPV) and the profitability index. The NPV and PI both consider the time value of money and result in the same accept or reject decision when considering an independent project. The main difference between the two is that

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