Using the internal rate of return rule, a conventional project should be accepted if the internal rate of return is:
A) only equal to the current weighted average cost of capital.
B) greater than the current weighted average cost of capital.
C) less than the current weighted average cost of capital.
D) negative.
E) positive.

Question

Quizplus · Accepted Answer

The internal rate of return (IRR) rule states that a conventional project should be accepted if its IRR exceeds the project's cost of capital, which is often represented by the weighted average cost of capital (WACC). If the IRR is greater than the WACC, it means the project is expected to generate a return higher than the cost of financing it, making it a worthwhile investment.

Using the Internal Rate of Return Rule, a Conventional Project