If the internal rate of return is less than the hurdle rate, the net present value of the project will be negative.

Question

Quizplus · Accepted Answer

This is because the internal rate of return is the discount rate at which the net present value of the cash inflows equals the net present value of the cash outflows. If the internal rate of return is less than the hurdle rate, it means that the project's cash inflows are not sufficient to cover the expected rate of return demanded by investors, resulting in a negative net present value.

If the Internal Rate of Return Is Less Than the Hurdle