A general rule in capital budgeting is that a project is accepted only if the internal rate of return equals or ________.
A) exceeds the required rate of return
B) exceeds the inflation rate
C) exceeds the risk-free rate
D) exceeds the accrual accounting rate of return

Question

Quizplus · Accepted Answer

The internal rate of return represents the rate at which the net present value of a project is equal to zero. Hence, if the internal rate of return equals or exceeds the required rate of return, the project is considered profitable and acceptable, as it generates enough returns to compensate for the cost of capital and provides a positive net present value. The other options, such as exceeding the inflation rate, risk-free rate, or accrual accounting rate of return, may provide some guidance on the minimum level of return expected, but they are not sufficient to ensure that the project is profitable or desirable from a financial standpoint.

A General Rule in Capital Budgeting Is That a Project