23. Which of the following statements is (are) true? (NPV = net present value, IRR = internal rate of return; in both (I) and (II) , the cost of capital > 0)

a. If the NPVs are same for two different projects (using the same cost of capital and same initial investment) , they must also have same IRR.
b. If an investment ends up with an IRR < 0, then the NPV must also be less than 0.

Question

23.	Which of the following statements is (are) true? (NPV = net present value, IRR = internal rate of return; in both (I) and (II), the cost of capital > 0)

a. If the NPVs are same for two different projects (using the same cost of capital and same initial investment), they must also have same IRR.
b. If an investment ends up with an IRR < 0, then the NPV must also be less than 0.

Quizplus · Accepted Answer

The IRR is the discount rate that makes the NPV of an investment zero. If the IRR is less than 0, it means the investment's returns do not cover its initial costs, leading to a negative NPV. However, two projects can have the same NPV but different IRRs because the timing and magnitude of cash flows can affect the IRR differently.

23 Which of the Following Statements Is (Are) True? (NPV =