A project has a projected IRR of negative 100 percent.Which one of the following statements must also be true concerning this project?
A)The discounted payback period equals the life of the project.
B)The operating cash flow is positive and equal to the depreciation.
C)The net present value of the project is negative and equal to the initial investment.
D)The payback period is exactly equal to the life of the project.
E)The net present value of the project is equal to zero.

Question

Quizplus · Accepted Answer

A negative IRR indicates that the project's cash flows are not sufficient to cover the required rate of return. Therefore, the net present value of the project will be negative and equal to the initial investment. The other statements may or may not be true for a project with a negative IRR.

A Project Has a Projected IRR of Negative 100 Percent