An internal rate of return greater than the cost of capital, guarantees that the firm earns at least its required return. Such an outcome should enhance the market value of the firm and therefore the wealth of its owners.

Question

Quizplus · Accepted Answer

This statement is true because if the internal rate of return is greater than the cost of capital, it means that the firm's investments are generating more returns than the cost of capital, which is the minimum required return. This would increase the firm's profitability and market value, leading to an increase in the wealth of its owners.

An Internal Rate of Return Greater Than the Cost of Capital