A project's expected return is its IRR. Hence the firm won't invest in a project unless its IRR is less than the firm's cost of capital.

Question

Quizplus · Accepted Answer

A project's expected return may be its IRR, but the firm may still choose to invest in a project with an IRR less than its cost of capital if the project generates positive net present value (NPV) at that cost of capital. Therefore, the decision to invest in a project is based on the NPV of the project, not just its IRR.

A Project's Expected Return Is Its IRR