When a Project's internal rate of return equals its opportunity cost of capital, then:
A)The project should be rejected
B)The project has no cash inflows
C)The net present value will be positive
D)The net present value will be zero

Question

Quizplus · Accepted Answer

When a project's internal rate of return equals its opportunity cost of capital, the net present value of the project will be zero. This means that the cash inflows from the project are just enough to cover the cost of capital, resulting in neither a positive nor a negative net present value. Therefore, option D is the correct choice. Option A is incorrect because a project would only be rejected if its internal rate of return is less than its opportunity cost of capital. Option B is incorrect because a project cannot have an internal rate of return if there are no cash inflows. Option C is incorrect because the net present value can only be positive if the internal rate of return is greater than the opportunity cost of capital.

When a Project's Internal Rate of Return Equals Its Opportunity