An internal rate of return greater than the cost of capital guarantees that the firm earns at least its required return. Investing in such an project would enhance the market value of the firm and therefore the wealth of its owners.

Question

Quizplus · Accepted Answer

When the internal rate of return is greater than the cost of capital, it means the project is generating returns higher than the cost of borrowing. This surplus generates a return for the shareholders, thus enhancing the market value of the firm and the wealth of the owners.

An Internal Rate of Return Greater Than the Cost of Capital