Question

If a project's expected rate of return exceeds its opportunity cost of capital, one would expect:...

If a project's expected rate of return exceeds its opportunity cost of capital, one would expect:

Multiple Choice

the opportunity cost of capital to be too low.

the project to have a positive NPV.

the NPV to be zero.

0 0
Add a comment Improve this question Transcribed image text
Answer #1

Option '2' is correct

If a project's expected rate of return exceeds its opportunity cost of capital, one would expect the IRR to exceed the Opportunity cost of capital.

So, Investor expect The Project to have a positive NPV

Add a comment
Know the answer?
Add Answer to:
If a project's expected rate of return exceeds its opportunity cost of capital, one would expect:...
Your Answer:

Post as a guest

Your Name:

What's your source?

Earn Coins

Coins can be redeemed for fabulous gifts.

Not the answer you're looking for? Ask your own homework help question. Our experts will answer your question WITHIN MINUTES for Free.
Similar Homework Help Questions
  • The internal rate of return (IRR) is a capital budgeting project's expected return. Which of the...

    The internal rate of return (IRR) is a capital budgeting project's expected return. Which of the following statements about the IRR method is true? Because of the uncertainty connected with risky cash flows, the realized return will almost surely be different from the IRR. Decision rule for IRR: undertake the capital budgeting project only if the IRR equals r, the project's cost of capital. If the cost of capital (required return) equals the IRR (expected return), the NPV is greater...

  • 17. If the profitably index for a project exceeds 1, then the project's net present value...

    17. If the profitably index for a project exceeds 1, then the project's net present value is positive a. b. internal rate of return is less than the projects's disount rate. payback period is less than 5 years. d. c. Accounting rate of return is greater than the project's rate of return. 18. If a project's profitability index is less than 1, the project's a. discount rate is above its cost of capital. b. Internal rate of return is less...

  • IRR A project's internal rate of return (IRR) is the -Select- The IRR is an estimate...

    IRR A project's internal rate of return (IRR) is the -Select- The IRR is an estimate of the project's rate of return, and it is comparable to the -Select-on a bond. The equation for calculating the IRR is: ;that forces the PV of its inflows to equal its cost. CF2 CFN 1 IRF 1 IRF 1IR CFt t-1 (1 +IRR) CFt is the expected cash flow in Period t and cash outflows are treated as negative cash flows. There must...

  • СР, 0 A project's internal rate of return (IRR) is the -Select- that forces the PV...

    СР, 0 A project's internal rate of return (IRR) is the -Select- that forces the PV of its inflows to equal its cost. The IRR is an estimate of the project's rat of return, and it is comparable to the - Select on a bond. The equation for calculating the IRR is: NPV = CF. + CF + СР + ... + =0 (1 + IRR) (1 + ru (1 + R) CF (1 + IRR) CFt is the expected...

  • When calculating a project's NPV, cash flows are discounted at: O A) the opportunity cost of...

    When calculating a project's NPV, cash flows are discounted at: O A) the opportunity cost of capital. OB) the risk-free rate of return. OC) a discount rate of zero. D) the internal rate of return. 0 1 4 5 2 + 5,600 3 + + -18,000 5,600 5,600 5,600 5,600 A firm with a 14% WACC is evaluating one project for this year's capital budget. After-tax cash flows, including depreciation are attached. What is the regular payback for this project?...

  • Capital Budgeting Decision Criteria: IRR IRR A project's internal rate of return (IRR) is the -Select-compound...

    Capital Budgeting Decision Criteria: IRR IRR A project's internal rate of return (IRR) is the -Select-compound ratediscount raterisk-free rateCorrect 1 of Item 1 that forces the PV of its inflows to equal its cost. The IRR is an estimate of the project's rate of return, and it is comparable to the -Select-YTMcoupongainCorrect 2 of Item 1 on a bond. The equation for calculating the IRR is: CFt is the expected cash flow in Period t and cash outflows are treated...

  • A project's NPV profile graph intersects the Y-axis at 0% cost of capital and intersects the...

    A project's NPV profile graph intersects the Y-axis at 0% cost of capital and intersects the X-axis at the project's Select (where NPV = 0). The Y-axis intersection point represents the project's undiscounted NPV. The point at which 2 projects' profiles cross one another is the crossover rate. The crossover rate can be found by calculating the Select of the differences in the projects' cash flows (Project Delta). A Select NPV profile indicates that increases in the cost of capital...

  • 8) Project A has an internal rate of return (IRR) of 15 percent. Project B has...

    8) Project A has an internal rate of return (IRR) of 15 percent. Project B has an IRR of 14 percent. Both projects have a required retum of 12 percent. Which of the following statements is MOST correct? A) Project A must have a higher NPV than Project B. B) Both projects have a positive net present value (NPV) C) Project B has a higher profitability index than Project A. D) If the required return were less than 12 percent,...

  • In financial analysis, it is important to select an appropriate discount rate. A project's discount rate...

    In financial analysis, it is important to select an appropriate discount rate. A project's discount rate must be high to compensate investors for the project's risk. The return that shareholders require from the company as a compensation for their investment risk is referred to as the cost of equity. Consider this case: Weghorst Co, is a 100% equity-financed company (no debt or preferred stock); hence, its WACC equals its cost of common equity. Weghorst Co.'s retained earnings will be sufficient...

  • You have an opportunity to invest $49,700 now in return for $59,000 in one year. If your cost of capital is 8.2%, what...

    You have an opportunity to invest $49,700 now in return for $59,000 in one year. If your cost of capital is 8.2%, what is the NPV of this investment? The NPV will be $ (Round to the nearest cent.)

ADVERTISEMENT
Free Homework Help App
Download From Google Play
Scan Your Homework
to Get Instant Free Answers
Need Online Homework Help?
Ask a Question
Get Answers For Free
Most questions answered within 3 hours.
ADVERTISEMENT
ADVERTISEMENT