Asked by Magen Phillips on May 14, 2024
Verified
If the internal rate of return (IRR)of an investment is lower than the hurdle rate,the project should be accepted.
Hurdle Rate
The minimum acceptable rate of return on an investment that a manager or company would consider in order to pursue the project.
- Evaluate the role of the payback period, internal rate of return (IRR), and net present value (NPV) in the selection of investment opportunities.
- Gain an insight into the notion of hurdle rate and its critical role in the determination of capital budgeting choices.
Verified Answer
JP
Jennifer PosadaMay 20, 2024
Final Answer :
False
Explanation :
If the IRR of an investment is lower than the hurdle rate, it means that the project is not generating enough return to meet the required rate of return. Therefore, the project should be rejected, not accepted.
Learning Objectives
- Evaluate the role of the payback period, internal rate of return (IRR), and net present value (NPV) in the selection of investment opportunities.
- Gain an insight into the notion of hurdle rate and its critical role in the determination of capital budgeting choices.
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