If a project has an internal rate of return of 12 per cent and a negative net present value,which of the following statements is true regarding the discount rate used for the net present value computation?

Question

Quizplus · Accepted Answer

A negative net present value means that the initial investment is greater than the present value of the expected cash inflows. This implies that the discount rate used was greater than the internal rate of return of the project. If the discount rate was equal to or less than the internal rate of return, the net present value would have been positive. Therefore, the correct answer is A.

If a Project Has an Internal Rate of Return of 12