Question

If NPV is positive for a project, then IRR for this same project will be higher than the required rate of return of this project. (Note this project has a conventional cash flow pattern - outflow in year 0, followed by inflows in the future years of the project).

True or False

Answer #1

The above statement is **True**

Explanation:-

Let us assume that NPV is calcualted at Required rate of return

If the NPV is positive means The NPV is grether than 0.

At IRR = required rate of return ,NPV is Zero.

IRR< Required rate of return , NPV is negative ,.

IRR > Required rate of return , NPV is Positive

here NPV is positive that means IRR > required rate of Return

IRR for this same project will be higher than the required rate of return of this project.

Small Example : -

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b. must be less than the required rate of return
c. could be greater or less than the required rate of return
d. cannot be determined without actual cash flows
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