When using the internal rate of return method, a project will be rejected if:

Question

Quizplus · Accepted Answer

The internal rate of return method compares the rate of return generated by a project to the company’s required rate of return or hurdle rate. If the internal rate of return is less than the hurdle rate, the project is not expected to be profitable enough to meet the company’s investment requirements and should be rejected. Therefore, option C is the correct answer. Option A is incorrect because if the internal rate of return is greater than the hurdle rate, the project is profitable enough to meet the company’s requirements and should be accepted. Option B is incorrect because it is the breakeven point where the project generates a rate of return equal to the hurdle rate, and it typically indicates that the project is not expected to add significant value to the company. Option D is incorrect because there is a correct answer.

When Using the Internal Rate of Return Method, a Project