Which of the Following Statements Is True

question 60

Multiple Choice

Which of the following statements is true?
(I) If an investment project has an internal rate of return (IRR) equal to the cost of capital,the Net Present Value (NPV) for that project must be greater than 0
(II) If [CF₁ + CF₂ + … + CF_k] > CF₀,then the IRR will always be greater than 0.(CF_k = net cash flow at end of year k)

• A)I & II are true
• B)(I)only
• C)(II)only
• D)Neither statement is true

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Definitions:

Interest Calculations

The process of figuring out the amount of interest to be added to the principal amount of a loan or deposit, based on the rate and the time.

Payment Maturity

The date on which a financial obligation must be repaid in full.

Note Issuance

Note issuance involves the creation and offering of a promissory note, a financial instrument wherein the issuer promises to pay a specific amount to the holder on demand or at a future date.

Estimable Liability

A financial obligation or debt that can be measured or estimated with a reasonable level of accuracy.