A company invests in a project that realizes an internal rate of return equal to its cost of capital. This project should:

Question

Quizplus · Accepted Answer

The internal rate of return (IRR) of a project is the discount rate that makes the net present value (NPV) of the project equal to zero. If the IRR is equal to the cost of capital, then the NPV of the project is zero. This means that the project neither adds nor subtracts from the value of the company. Therefore, option B is the correct answer.

A Company Invests in a Project That Realizes an Internal