The decision rule for the internal rate of return states that if the IRR
A)is greater than the market interest rate the project should be approved
B)is lower than the market interest rate the project should be approved
C)is roughly the same as the market interest rate the project should be approved
D)is greater than 0 the project should be approved

Question

Quizplus · Accepted Answer

The decision rule for the internal rate of return states that if the IRR is greater than the market interest rate, the project should be approved. This is because the IRR represents the rate at which the project's cash flows are equal to the project's initial investment. Therefore, if the IRR is greater than the market interest rate, it means that the project will generate a rate of return higher than the cost of capital, making it a profitable investment.

The Decision Rule for the Internal Rate of Return States