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if the internal rate of return on an investment is positive, then the investment's net present...

if the internal rate of return on an investment is positive, then the investment's net present value must be postive. True or false and why?

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Answer #1

This statement is False.
If the IRR is positivebut less than cost of capital, then the NPV is negative.
If the IRR is positive but equals to cost of capital, then the NPV of project is ZERO.
Only IF the IRR is positive and greater than cost of capital, then NPV is positive.

IF Then Capitl Budgeting decision
NPV<0 IRR < cost of capital Reject the project
NPV = 0 IRR = cost of capital Reject the Project
NPV>0 IRR> cost of capital Accept the project

I hope this clear your doubt.

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