Answered: We should accept a project if the Net…

We should accept a project if the Net Present Value is positive and the Internal Rate of Return is higher than the cost of capital. What are the reasons for that, what this means?

Principles of Accounting Volume 2

19th Edition

ISBN:9781947172609

Author:OpenStax

Publisher:OpenStax

Chapter11: Capital Budgeting Decisions

Section: Chapter Questions

Problem 24Q: How does the size of the initial investment affect the internal rate of return on the net present...

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We should accept a project if the Net Present Value is positive and the Internal Rate of Return is higher than the cost of capital. What are the reasons for that, what this means?

Definition Definition Calculation used to evaluate the investment and financing decisions that involve cash flows occurring over multiple periods. NPV is calculated as the difference between the present value of cash inflow and cash outflow. NPV is used for capital budgeting and investment planning as well as to compare similar investment alternatives.

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