Whenever the IRR on a project equals that project's required rate of return
A)the NPV equals 0.
B)The NPV equals the initial investment.
C)The profitability index equals 0.
D)The NPV equals 1.

Question

Quizplus · Accepted Answer

The Internal Rate of Return (IRR) is the rate at which the net present value (NPV) of a project is zero. Therefore, if the IRR on a project equals that project's required rate of return, it implies that the NPV equals zero (i.e., all cash inflows are exactly offset by cash outflows). Hence, choice A is the correct answer. The other options (B, C, and D) do not represent accurate outcomes when the IRR equals the required rate of return.

Whenever the IRR on a Project Equals That Project's Required