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If you are using a discount rate of 8% to evaluate the acquisition of an Ultrasound...

If you are using a discount rate of 8% to evaluate the acquisition of an Ultrasound Machine, and the IRR is 8%, what can you conclude about the ROI of the project? Would you recommend investing in the proposed project?

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Answer #1

The correct answer is " Should be Invested"

The internal rate of return is the average return that an investment gives annually over the lifetime of the project, It assumes that the cash flows are reinvested at the IRR rate itself, So if Discount rate and the IRR rate are same then it means that the project is giving equal return as that of cost of capital or Minimum rate of return, So it would be worthy for the company to invest in the project as they are incurring any losses.

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