Which of the following statements is (are)true?
(I)If an investment project has an internal rate of return (IRR)equal to the cost of capital,the net present value (NPV)for that project must be positive
(II)The NPV method implicitly assumes that all cash flows received can be reinvested at the cost of capital
(III)An initial investment of $100,000 is made,and the expected cash flows from this investment are $25,000 at the end of each of years one to six inclusive.The IRR on this investment (Rounded to the nearest ½%)is 13%.

Question

Quizplus · Accepted Answer

The NPV method assumes reinvestment at the cost of capital. If IRR equals the cost of capital, NPV is zero, not positive. The IRR calculation for the given cash flows does not result in 13%.

Which of the Following Statements Is (Are)true