Using the internal rate of return rule, a conventional project should be accepted if the internal rate of return is:
A) 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 project should be accepted if its IRR is greater than the company's cost of capital. The cost of capital is represented by the weighted average cost of capital (WACC), which is the minimum return required by the company's investors. Therefore, if the IRR is greater than the WACC, the project's return is higher than the minimum required return, making it a desirable investment.

Using the Internal Rate of Return Rule, a Conventional Project