When a Project's internal rate of return equals its opportunity cost of capital, then:
A)the project should be rejected.
B)the project has no cash inflows.
C)the net present value will be positive.
D)the net present value will be zero.

Question

Quizplus · Accepted Answer

When a project's internal rate of return equals its opportunity cost of capital, the net present value will be zero. This means that the project is neither adding nor subtracting value from the firm, but is just earning the required rate of return. Therefore, the project can be considered acceptable, but not necessarily the best use of funds.

When a Project's Internal Rate of Return Equals Its Opportunity