When reviewing the net present profile for a project,
A) the higher the discount rate, the higher the NPV.
B) the higher the discount rate, the higher the IRR.
C) the IRR will always be a point on the horizontal axis line where NPV = 0.
D) the IRR will always be a point on the horizontal axis equal to the required return.

Question

Quizplus · Accepted Answer

The net present profile for a project is a graph that shows how the NPV changes at different discount rates. The IRR is the discount rate that makes the NPV equal to zero. Therefore, the IRR will always be a point on the horizontal axis line where NPV = 0, making choice C the correct answer. Choices A and B are incorrect because they do not apply to the net present profile, and choice D is incorrect because the IRR may be higher or lower than the required return.

When Reviewing the Net Present Profile for a Project