When a Project's Internal Rate of Return Equals Its Opportunity

question 91

Multiple Choice

When a project's internal rate of return equals its opportunity cost of capital,then:

• A) the project should be rejected.
• B) the project has no cash inflows.
• C) the net present value will be positive.
• D)the net present value will be zero

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Definitions:

Production Possibilities Frontier

The production possibilities frontier (PPF) is a curve depicting all maximum output possibilities for two or more goods, given a set of inputs.

Opportunity Cost

The value of the next best alternative that is forgone as a result of making a particular choice.

Inputs

In economics, inputs are the resources used in the production of goods and services, such as labor, materials, and capital.

Trade-off

A situation where making a decision to gain one thing requires sacrificing another.