The relationship between NPV and IRR is such that ____.
A) both approaches always provide the same ranking of alternative investment projects
B) the IRR of a project is equal to the firm's cost of capital if the NPV of a project is $0
C) if the NPV of a project is negative, the IRR must be greater than the cost of capital
D) None of these are correct

Question

Quizplus · Accepted Answer

The NPV and IRR approaches may not always provide the same ranking of alternative investment projects. If the NPV of a project is $0, the IRR will be equal to the firm's cost of capital. However, if the NPV of a project is negative, the IRR must be less than the cost of capital. Therefore, option B is the correct choice.

The Relationship Between NPV and IRR Is Such That ____