If the net present value is positive,the internal rate of return must be:
A)Equal to the required rate of return
B)Greater than the initial outlay
C)Less than the required rate of return
D)Greater than the required rate of return

Question

Quizplus · Accepted Answer

If the net present value (NPV) is positive, it means that the project's expected cash inflows are greater than the initial investment. This implies that the project is generating a return that exceeds the required rate of return (RRR). In turn, this implies that the internal rate of return (IRR) must be greater than the RRR because the IRR is the rate at which the present value of the project's cash inflows equals the initial investment. Therefore, the best choice is D, which states that the IRR must be greater than the required rate of return.

If the Net Present Value Is Positive,the Internal Rate of Return