When the NPV of an investment is positive, then the IRR will be:
A)equal to the opportunity cost of capital.
B)greater than the opportunity cost of capital.
C)less than the opportunity cost of capital.
D)less than or equal to the opportunity cost of capital.

Question

Quizplus · Accepted Answer

When the NPV of an investment is positive, it means that the return on the investment is greater than the cost of capital, which is the opportunity cost of capital. The IRR is the rate at which the NPV is zero, meaning that it is equal to the investment's cost of capital. Since the NPV is positive, the IRR must be greater than the cost of capital. Therefore, the best choice is B, "greater than the opportunity cost of capital."

When the NPV of an Investment Is Positive, Then the IRR