can irr of a project be greater than inflation rate whywhy

can irr of a project be greater than inflation rate ? why/why not?

Solution

The Internal Rate of Return is a method calculating.The Internal Rate of Return is an annualized effective compound return rate that sets the net present value of all cash flows equal to zero. It can be greater than the inflation rate. This is because the calculation of IRR doesnt require any external factors like inflation or the cost of capital. It can be positive or negative depending on the net present value of all cash flows. If it is positive ,the project can be accepted, but if it is negative,the project cannot be accepted.