Suppose that the payback period is never. What do you know about the IRR of the project ?
Suppose that the payback period is never. What do you know about the IRR of the project ?
Homework Answers
If the payback period and life of the project are exactly equal, then internal rate of return (IRR) should be equal to zero. Since, the project pays back only initial investment, the IRR should be equal to zero.
Internal rate of return (IRR) is the rate of return at which the net present value (NPV) of the project is zero.
According rule of the IRR, the project should be acceptable if IRR is greater than the required return. If IRR is less than required return, then the project should be rejected.
If the project does not have the payback period, it means it does not payback its initial investment.
Therefore, the IRR of the project should be negative as the project is not able to cover its initial cost.
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Suppose that the payback period is never. What do you know about the IRR of the project ?
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