The acceptance of an investment project implies that its:
I.IRR is greater than a certain threshold.
II.NPV is greater than its IRR.
III.NPV is greater than or equal to 0.

Question

Quizplus · Accepted Answer

The acceptance of an investment project requires that its NPV is greater than or equal to 0 as it indicates that the project generates a positive net profit after considering the cost of capital. The use of IRR is optional, but it should be greater than a certain threshold or the cost of capital. Hence, statement I is not necessary for project acceptance, but statement III is essential. Statement II is incorrect as a project with a positive NPV already assures that it is generating more cash flows than the cost of capital, so comparing the NPV to the IRR is not necessary.

The Acceptance of an Investment Project Implies That Its