If a Firm Undertakes a Project with Ordinary Cash Flows

question 8

Multiple Choice

If a firm undertakes a project with ordinary cash flows and estimates that the firm has a positive NPV, then the IRR will be:

• A) less than the cost of capital.
• B) greater than the cost of capital.
• C) greater than the cost of the project.
• D) cannot be determined from this information

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Definitions:

Keynes

An economist who revolutionized economic thinking with theories on government spending's effects on economic cycles.

Depression

A prolonged and severe downturn in economic activity, characterized by significant unemployment, declining output, and deflation.

Interest Rate

The component of a loan levied as interest to the borrower, usually characterized as an annual percentage of the outstanding loan value.

Aggregate Demand

Total economic interest in goods and services, assessed at a uniform price level throughout a specific period.