The Relationship Between NPV and IRR Is Such That

question 91

Multiple Choice

The relationship between NPV and IRR is such that:

• A) both approaches always provide the same ranking of alternative investment projects.
• B) the IRR of a project is equal to the firm's cost of capital if the NPV of a project is $0.
• C) if the NPV of a project is negative, the IRR must be greater than the cost of capital.
• D) none of the above

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Definitions:

Equilibrium Price

The price at which the quantity of a good demanded by consumers equals the quantity supplied by producers, leading to a balance without excess supply or demand.

Inferior Good

A type of good for which demand decreases as the income of consumers increases, contrasting with normal goods.

Peanut Butter

A food paste or spread made from ground, dry-roasted peanuts.

Recession

A downturn in the economy.