Using internal rate of return,a conventional project should be accepted if the internal rate of return is:
A) equal to the discount rate.
B) greater than the discount rate.
C) less than the discount rate.
D) negative.
E) positivE.

Question

Quizplus · Accepted Answer

The internal rate of return (IRR) is the rate at which the present value of cash inflows from a project equals the present value of cash outflows. If the IRR is greater than the discount rate, it means the project generates more return than the cost of capital, and therefore, the project should be accepted. If the IRR is equal to or less than the discount rate, it means the project generates less return than the cost of capital or even negative return, and therefore, the project should not be accepted.

Using Internal Rate of Return,a Conventional Project Should Be Accepted