If a project has an internal rate of return of 14% and a positive net present value, which of the following statements istrue regarding the discount rate used for the net present value computation?

Question

Quizplus · Accepted Answer

The positive net present value indicates that the project's cash inflows are greater than its outflows when discounted at a certain rate. The internal rate of return of 14% suggests that the project is expected to generate a return of 14% on the investment. Since the project has a positive net present value at this return rate, it implies that the discount rate used for the net present value computation must have been less than 14%.

If a Project Has an Internal Rate of Return of 14