Project Alpha has an internal rate of return (IRR) of 15 percent. Project Beta h
ID: 2653281 • Letter: P
Question
Project Alpha has an internal rate of return (IRR) of 15 percent. Project Beta has an IRR of 14 percent. Both projects have a required return of 12 percent. Which of the following statements is MOST correct?
Both projects have a positive net present value (NPV).
Project Alpha must have a higher NPV than Project Beta.
Project Beta has a higher profitability index than Project Alpha.
If the required return were less than 12 percent, Project Beta would have a higher IRR than Project Alpha.
Both projects have a positive net present value (NPV).
Project Alpha must have a higher NPV than Project Beta.
Project Beta has a higher profitability index than Project Alpha.
If the required return were less than 12 percent, Project Beta would have a higher IRR than Project Alpha.
Explanation / Answer
Answer:
If the IRR of the Projects is more than required rate of return, then it is sure that they shall have positive NPV. Hence the most correct answer should be :
Both projects have a positive net present value (NPV).
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