When using the net present value technique to evaluate the quality of an investm

Question

When using the net present value technique to evaluate the quality of an investment, if the resulting NPV is positive, the cost of capital will generally be?
Less than internal rate of return? or is it greater than or =
The internal rate of return is the rate of interest that makes the present value of a project’s cash inflows equal to present value of cash flows? Or is it less than or = When using the net present value technique to evaluate the quality of an investment, if the resulting NPV is positive, the cost of capital will generally be?
Less than internal rate of return? or is it greater than or =
The internal rate of return is the rate of interest that makes the present value of a project’s cash inflows The internal rate of return is the rate of interest that makes the present value of a project’s cash inflows equal to present value of cash flows? Or is it less than or =

Explanation / Answer

When using the net present value technique to evaluate the quality of an investment, if the resulting NPV is positive, the cost of capital will generally be? Less than internal rate of return? or is it greater than or = There is no direct relationshp between cost of capital & IRR. IRR is calculated based on Cash flows over no of years. Healthier the CFs, higher the IRR. When NPV is zero, IRR = Cost of Capital The internal rate of return is the rate of interest that makes the present value of a project’s cash inflows equal to present value of cash flows? Or is it less than or = : Ans : Equal to PV of CFs as at IRR, Cash Outflows = Cash Infows & NPV = 0

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