PRC-2 · Chapter 6 · Question 4 of 45
When utilizing the Internal Rate of Return (IRR) appraisal method, an investment project is deemed financially viable and acceptable when the calculated IRR is:
Test yourself: pick an answer
Reveal answer & explanation
Correct answer: D) Greater than the company's established cost of capital.
Explanation
The IRR rule states that an investment should be accepted if its internal rate of return exceeds the cost of capital (or hurdle rate) required to finance it.
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