Multiple choice

If NPV is positive, the IRR will be

  1. positive

  2. K = R

  3. K < R

  4. none of the above
Reveal answer Fill a bubble to check yourself
C Correct answer
Explanation

When NPV is positive at a given discount rate, the project's internal rate of return (R) exceeds the cost of capital (K). The relationship K < R indicates that the project generates returns higher than the required rate, making it acceptable. Positive NPV and IRR > cost of capital are equivalent decision criteria.

Keep practicing — related questions