When the Net Present Value for a Project Is Negative

question 7

Multiple Choice

When the net present value for a project is negative, the internal rate of return is _________ the cost of capital.

• A)greater than
• B)greater than or equal to
• C)less than
• D)equal to

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Definitions:

Rate of Return

The gain or loss on an investment over a specific period, expressed as a percentage of the investment's initial cost.

Scheduled Payments

Predetermined amounts of money paid at regular intervals under the terms of a loan or investment agreement.

Compounded Monthly

Interest calculation method where the interest is added to the principal amount every month, leading to interest being earned on interest.

Overdue Accounts

Financial accounts that have not been paid by the due date, often subject to late fees or other penalties.