Practice question · Multiple choice
A project’s IRR is 18% and the firm’s cost of capital is 11%. By the IRR rule, what should the firm do?
Hints
- Compare what the project earns (IRR) with what the money costs (r).
- 18% earned vs 11% paid.
Show the answer
A. Accept: the project earns more than the capital costs
Why
IRR 18% > cost of capital 11% → accept; equivalently, NPV at 11% is positive. For a single conventional project the two rules agree.
Practise NPV and IRR
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