A project is profitable when its internal rate of return is ______ the interest rate.
A) Greater than
B) Less than
C) Equal to
D) Greater than or equal to

Question

Quizplus · Accepted Answer

A project is considered profitable when its internal rate of return (IRR), which is the rate of return generated by the project, is greater than the cost of capital or the interest rate. This is because the IRR represents the discount rate at which the net present value (NPV) of the project is zero or positive, indicating that the project will generate returns that are higher than the cost of capital. Therefore, if the IRR is greater than the interest rate, the project is profitable.

A Project Is Profitable When Its Internal Rate of Return