If the internal rate of return on a project is greater than the project's cost of capital and the cash flows have only one sign change, the net present value of the project will be greater than $0.

Question

Quizplus · Accepted Answer

The internal rate of return (IRR) is the discount rate that makes the net present value (NPV) of all cash flows from a particular project equal to zero. If the IRR is greater than the project's cost of capital, it means the project is expected to generate a return higher than the cost to finance it. Therefore, when discounting the cash flows at the cost of capital, the NPV will be positive, assuming there is only one sign change in the cash flows (from negative to positive, indicating an initial investment followed by returns).

If the Internal Rate of Return on a Project Is