If the risk-adjusted net present value is positive,
1) the internal rate of return exceeds the firm's cost of capital
2) the internal rate of return is less than the firm's cost of capital
3) the present value of cash inflows exceeds the present cost of an investment
4) the present value of cash inflows is less than the present cost of an investment

Question

If the risk-adjusted net present value is positive,​
1) the internal rate of return exceeds the firm's cost of capital
2) the internal rate of return is less than the firm's cost of capital
3) the present value of cash inflows exceeds the present cost of an investment
4) the present value of cash inflows is less than the present cost of an investment

Quizplus · Accepted Answer

A positive risk-adjusted net present value means that the investment is generating more cash inflows than the cost of the investment and that the rate of return is higher than the firm's cost of capital. Therefore, choices 1 and 3 are correct. Choice 2 is incorrect as it states the opposite of what a positive NPV implies, and choice 4 is incorrect as it states that the present value of cash inflows is less than the cost of the investment, which is not the case with a positive NPV.

If the Risk-Adjusted Net Present Value Is Positive,​

If the Risk-Adjusted Net Present Value Is Positive,