When the net present value is negative, the internal rate of return is___________the cost of capital.
A) less than
B) equal to
C) greater than or equal to
D) greater than

Question

When the net present value is negative, the internal rate of return is___________the cost of capital. 
A) less than
B) equal to
C) greater than or equal to
D) greater than

Quizplus · Accepted Answer

If the net present value is negative, it means that the initial investment is greater than the present value of the expected future cash flows. Therefore, the internal rate of return must be less than the cost of capital.

When the Net Present Value Is Negative, the Internal Rate