Score out of Question 1 A proposed project has a negative ne

Score out of \"Question #1 A proposed project has a negative net present value (NPV). Does this mean that the project has a negative internal rate of return (IRR)? Why or why not?

Solution

The internal rate of return is the discount rate used in NPV method. When the project has a negative net present value the IRR will be lower than the cost of capital but not necessarily negative, thus a project can have both a negative NPV and positive IRR