Project a Has an Internal Rate of Return (IRR) of 15

question 58

Multiple Choice

Project A has an internal rate of return (IRR) of 15 percent. Project B has an IRR of 14 percent. Both projects have a cost of capital of 12 percent. Which of the following statements is most correct?

• A) Both projects have a positive net present value (NPV).
• B) Project A must have a higher NPV than Project B.
• C) If the cost of capital were less than 12 percent, Project B would have a higher IRR than Project A.
• D) Statements a and c are correct.
• E) Statements a, b, and c are correct.

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Definitions:

Involuntary Reaction

A reflex or response to a stimulus that is automatic and not under the conscious control of an individual.

Autonomic Nervous System

The part of the nervous system that controls involuntary actions, such as the heartbeat and digestion, and regulates basic body processes.

Inverted-U Hypothesis

A theory suggesting that there is an optimal level of arousal for performance, with both too little and too much arousal leading to poorer performance.

Optimal Level

The most favorable or desirable degree or amount of something for achieving the best result or outcome.