If the NPV is negative what does it tell you about the IRR a

If the NPV is negative what does it tell you about the IRR?

a) The IRR is also negative

b) The IRR is positive

c) The IRR is less than the firm\'s Weighted Average Cost of Capital (WACC)

d) The IRR is more than the firm\'s Weighted Average Cost of Capital (WACC)

Solution

Net present value (NPV) = Present value of cash inflows-Present value of cash outflows.

These present values are calculated at WACC. If the project has negative, IRR will be less than WACC.

Hence, correct option is c) The IRR is less than the firm\'s Weighted Average Cost of Capital (WACC)