If a Project Has an Internal Rate of Return of 12

question 2

Multiple Choice

If a project has an internal rate of return of 12% and a negative net present value, which of the following statements is trueregarding the discount rate used for the net present value computation?

• A) The discount rate must have been greater than 12%.
• B) The discount rate must have been less than 12%.
• C) The discount rate must have been equal to 12%.
• D) The discount rate must have been 0%.

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Definitions:

Commercial Paper

An unsecured, short-term debt instrument issued by corporations, typically for the financing of accounts receivable and inventories.

Short-Term Financing

Funding obtained for a period of one year or less, used to cover immediate needs such as working capital requirements.

Minimum Denomination

The smallest unit of value in which a security or financial instrument can be issued or traded.

Net Worth

The difference between an individual or household’s assets and liabilities.