When evaluating capital budgeting projects, which of the following would NOT necessarily be an indicator of an acceptable project?
A) an NPV $0
B) an IRR the project's required rate of return
C) an IRR $0
D) All of the above are correct indicators.

Question

When evaluating capital budgeting projects, which of the following would NOT necessarily be an indicator of an acceptable project?
A) an NPV > $0
B) an IRR > the project's required rate of return
C) an IRR > $0
D) All of the above are correct indicators.

Quizplus · Accepted Answer

An IRR greater than $0 is not necessarily an indicator of an acceptable project as it only shows that the project's returns are positive, but it doesn't consider whether those returns are enough to compensate for the project's cost of capital. Projects with an IRR greater than the cost of capital (required rate of return) are considered acceptable because they generate returns that exceed the company's cost of financing. Therefore, choice C is not enough to determine project acceptability.

When Evaluating Capital Budgeting Projects, Which of the Following Would