anineiment progect has an internal rate of return equa Ahe e

anineiment progect has an internal rate of return equa( Ahe equired ratef elunthe c) is 2eco 2) is n

Solution

NPV of a project is the value obtained after deducting the PV of the cash flows from the initial investment.

IRR, if greater than the required return , then the project is accepted.

the IRR, is the rate at which the NPV is zero. If the IRR, is equal to the required rate of return then the cash flows will be discounted at the IRR , NPV will be zero,  This is how.

the formula for IRR IS :

CASH FLOW AT TIME 0 - CF1 / (1 + IRR) + CF2/(1 + IRR)^2 + CF3 /(1+ IRR)^3 +......CFN/(1+ IRR)^N = 0

IN THIS QUESTION, SINCE THE CASH FLOWS WHILE CALCULATING THE NPV IS DISCOUNTED AT THE IRR, so the NPV is zero.