10 The IRR of a project with an investment of $1 million is 10%. What is true of

Question

10 The IRR of a project with an investment of $1 million is 10%. What is true of the project's NPV if alternative investments have an 8% return? (A) (B) (C) (D) The NPV is zero The NPV is greater than zero The NPV is less than zero None of the above A project has an NPV of $1,250 at 12%. If you were to calculate the projects IRR, you should get a number bigger than 12% ? 11 True False 12 A project has an NPV of $1,250 at 12%. If you were to calculate the Project's Pl, will you get a number bigger than 1? Yes No

Explanation / Answer

10)

IRR is the rate at which net present value will be $0. It is the implied rate from the cash flows of the project. It is a cut off rate for the project. If the required return exceeds IRR, it should be rejected.

Hence, correct option is “B. The NPV is greater than ZERO”

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