Question

ALL OF THE BELOW ARE TRUE ABOUT INTERNAL RATE OF RETURN EXCEPT

Select one:
a. ACCEPT THE PROJECT IF IRR IS LESS THAN THE DISCOUNT RATE
b. NPV EQUAL ZERO
c. ACCEPT THE PROJECT IF IRR IS HIGHER THAN THE DISCOUNT RATE
d. IRR IS A WAY TO EVALUATE THE ACCEPTANCE OF A PROJECT

Please Solve As soon as
Solve quickly I get you two UPVOTE directly
Thank's
Abdul-Rahim Taysir

Answer 1

Option a: If IRR is less than discount rate, then the project is not viable as the internal rate of return is less than cost of capital. Any rate of return less than cost of capital is a loss making investment. So, the project must be rejected. Hence, the statement is wrong and the OPTION IS CORRECT

Option b: IRR is the rate that is used as discount rate which makes NPV = Zero. So, this statement is correct but the OPTION IS INCORRECT.

Option c: IRR>Discount rate , means the return is greater than cost of capital. So, one can accept the project. This statement is correct but the OPTION IS INCORRECT.

Option d:This statement is true as IRR is one of the method to evaluate a project. Hence, this statement is true but OPTION IS INCORRECT