A capital budgeting project has a net present value of $30,000 and a modified internal rate of return of 15%.The project's required rate of return is 13%.The internal rate of return is
A) greater than $30,000.
B) less than 13%.
C) between 13% and 15%.
D) greater than 15%

Question

Quizplus · Accepted Answer

The internal rate of return (IRR) is the discount rate that makes the net present value (NPV) of all cash flows from a particular project equal to zero. In this case, since the project's NPV is positive at the required rate of return of 13%, and the modified internal rate of return (MIRR) is 15%, the IRR must be higher than both the required rate of return and the MIRR, making it greater than 15%.

A Capital Budgeting Project Has a Net Present Value of $30,000