[Anonymous]

Hope every one is doing well .

The question is .

A project as a positive NPV . Which is correct regarding its required rate of return ?

The answer is “Less then the project’s internal rate of return.”

What is confusing is . IRR rate equates NPV to ZERO . So a greater NPV will have a greater IRR . I will be glad if some one could explain .

Thank you

[How many letters do you need]

Assam: IRR can get a little tricky with the terminology. What they mean by the required rate of return is the hurdle rate or the rate you compare the IRR to in order to determine if the project is acceptable. This rate will be equal to the discount rate for NPV, so if it's a positive NPV, then the IRR will be higher than the hurdle rate (or in this case, required rate of return). Hope that helps

MBA,CMA,CPA, CFF?, ABV?

[Anonymous]

Thank you for your reply .

So what i understand is Hurdle rate(Required rate) is like i want this much . Which is different then NPV and IRR. Which is always less then NPV and IRR .

Thank you

[How many letters do you need]

Well…hurdle rate used in IRR = required rate of return = discount rate used in NPV. NPV is a dollar metric not a percent metric so the required rate of return is used to get the final metric in NPV as to where with IRR it's used to compare to the final metric. Make sense?

MBA,CMA,CPA, CFF?, ABV?

[Author]

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