A company is considering a two year project, which has two annual internal rate or return, namely 10% and 25%. The sum of the undiscounted cash flow is positive.
The project will necessarily have a positive net present value, when the annual cost of capital is
A. more than 25%
B. more than 10%
C. between 10% to 25%
D. less than 25%
I found this question in Kaplan's study material and the suggested answer is A i.e. more than 25%. I am not clear about the calculation mechanism. Can you help me?
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multiple IRR
2y ago#1What is IRR, the position of NPV = 0
So the net present value (NPV) will be positive when the cost of capital is higher than the highest IRR, which in this case is 25%.
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