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13.) You are tasked with explaining to results from a recently prepared capital budget analysis. The...

13.) You are tasked with explaining to results from a recently prepared capital budget analysis. The results of the analysis require you to also clear up confusion in your office regarding the correct explanation of the capital budgeting decision rule. This this end which statement is correct? A.) Reject a project if the company’s stated hurdle rate is above the IRR B.) Accept your project if the IRR is equal to the Discount Rate C.) Accept your project if the cost of capital via the WACC exceeds the reported (IRR D.) Reject your project if the cost of capital is less than the NPV

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Option A.) Reject a project if the company’s stated hurdle rate is above the IRR

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ANSWER : OPTION A : Reject a project if the company's stated hurdle rate is above IRR.


[ At IRR, NPV = 0, So, at hurdle rateabove IRR,  NPV wlii be negative. Hence, project should be rejected. ]

answered by: Tulsiram Garg
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