When the net present value is negative, the internal rate of return is __________ the cost of capital.

Question

Quizplus · Accepted Answer

When the net present value is negative, it means that the present value of cash outflows exceeds the present value of cash inflows. This implies that the project is not generating enough returns to cover its costs, including the cost of capital. Hence, the internal rate of return (IRR) must be less than the cost of capital. If IRR was greater than or equal to the cost of capital, the project would have a positive net present value. Thus, choice C is the correct answer.

When the Net Present Value Is Negative, the Internal Rate