Question
A machine is being considered as a capital investment. Its cost is exactly equal to the present value of the inflows promised by the machine
A machine is being considered as a capital investment. Its cost is exactly equal to the present value of the inflows promised by the machine over its useful life discounted at the company's cost of capital. If the cost of capital is 12%, then the internal rate of return (IRR) of this machine is:
a) greater than 12%
b) less than 12%
c) equal to 12%
d) cannot be determined from the given information
Refer to the preceding question. The net present value (NPV) of the machine must be:
a) Greater than zero
b) less than zero
c) zero
d) cannot be determined from the given information
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