If a Net Present Value Analysis for a Normal Project

question 76

Multiple Choice

If a net present value analysis for a normal project gives an NPV greater than zero, an internal rate of return calculation on the same project would yield an internal rate of return ____ the required rate of return for the firm.

• A) greater than
• B) less than
• C) equal to
• D) Cannot be determined from the information given

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Definitions:

Beta

An indicator of a stock's fluctuation compared to the general market, where a beta above 1 signals increased volatility.

Risk-Free Rate

An estimated profit from a risk-free investment, commonly illustrated by government security yields.

Expected Return

The anticipated percentage gain or loss that an investor predicts a stock or investment will earn in the future based on historical or calculated projections.

Stock

A type of security that signifies ownership in a corporation and represents a claim on part of the corporation's assets and earnings.