Question

You are looking at an analysis done on Scott's company. Digging deeper into the analysis, you realize that Scott is considering investing $100,000 into a new business idea within his corporation. The project is a normal project and the NPV calculation provides a figure that is greater than zero. If the NPV > $0, the IRR calculation on the same project would yield an IRR __________ the required rate of return.

A cannot determine given the limited information provided

B equal to

C greater than

D less than

Answer 1

The answer to the question is A) cannot be determined using the limited information provided.

This is because IRR and NPV can give contradictory results because IRR is affected by timing as well as the amount of cash flows. Here none of the analysis is provided. Ideally for project acceptance if required rate is less than IRR, the project is accepted but here it cant be ascertained with full certainty as cash flows are not given

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