A firm should not make an investment if the internal rate of return is

Question

A firm should not make an investment if the internal rate of return is​

Quizplus · Accepted Answer

The internal rate of return (IRR) is the discount rate that makes the net present value (NPV) of an investment equal to zero. If the IRR is less than the cost of capital, it means that the project is not generating enough return to cover the cost of the capital used to finance it. Therefore, the investment will not be able to create value for the firm and it should not be undertaken. Options A and C are incorrect because they both suggest that the investment should be made if the return is greater than the cost of capital or interest rate, respectively, which is not necessarily true. Option D is also incorrect since the interest rate may not reflect the true cost of capital for the project.

A Firm Should Not Make an Investment If the Internal