A capital expenditure project has an expected 20 percent internal rate of return and a $10,000 net present value.It has one cash flow sign change.
A)The discount rate used to calculate NPV is greater than 20 percent
B)The project has another internal rate of return in addition to the 20 percent rate mentioned above
C)In the internal rate of return calculation, the project's cash inflows are assumed to be reinvested at the firm's required rate of return
D)None of these

Question

Quizplus · Accepted Answer

The project has only one cash flow sign change, indicating a single IRR. The NPV being positive suggests the discount rate is less than the IRR, not greater. IRR assumes reinvestment at the IRR itself, not the firm's required rate of return.

A Capital Expenditure Project Has an Expected 20 Percent Internal