An internal rate of return greater than the cost of capital guarantees that the firm will earn at least its required return.

Question

Quizplus · Accepted Answer

The internal rate of return (IRR) is the rate at which the present value of future cash flows of an investment equals the initial cost of the investment. If the IRR is greater than the cost of capital, it means that the investment is expected to generate a return higher than the cost of capital. This implies that the project is profitable and that the firm will earn at least its required return, therefore the statement is true.

An Internal Rate of Return Greater Than the Cost of Capital