If a net present value analysis for a normal project gives an NPV greater than zero, an internal rate of return calculation on the same project would yield an internal rate of return ____ the firm's cost of capital.

Question

Quizplus · Accepted Answer

If the NPV is greater than zero, it means that the project's expected cash inflows are higher than its expected cash outflows discounted at the firm's cost of capital. Therefore, the internal rate of return of the project should be higher than the firm's cost of capital in order to make the project economically viable.

If a Net Present Value Analysis for a Normal Project