You are given: F₀ = initial investment,F₁,F₂,…,F_n are the future net cash flows (where each is > 0) .You are told that the sum of the future cash flows exceeds the initial investment.That is,
(F₁ + F₂ + … + F_n) > F₀.Which of the following statements is (are) true?
(I) IRR must be greater than 0.
(II) NPV must be greater than 0.

Question

Quizplus · Accepted Answer

The sum of future cash flows exceeding the initial investment implies that the IRR is greater than 0, but it does not guarantee that the NPV is greater than 0, as NPV also depends on the discount rate used.

You Are Given: F0 = Initial Investment,F1,F2,…,Fn Are the Future

You Are Given: F₀ = Initial Investment,F₁,F₂,…,F_n Are the Future