Question

For each of the 3 given situations (parts) in this question, answer the following question: Is the IRR >, <, or = to the MARR, AND is it a good investment?

a. The net present value and the equivalent annual worth of an investment is greater than 0.
b. The net present value and the equivalent annual worth of an investment is equal to 0.
c. The net present value and the equivalent annual worth of an investment is less than 0.

Answer 1

In investment analysis, the IRR is compared to the MARR to determine if an investment is good. If both the NPV and the equivalent annual worth are greater than 0, the investment is good. If both are equal to 0, the investment is acceptable but not preferable. If both are less than 0, the investment is not good.

Step-by-step explanation:

In investment analysis, the internal rate of return (IRR) is compared to the minimum acceptable rate of return (MARR) to determine if the investment is good or not.

a. If the net present value (NPV) and the equivalent annual worth of an investment are both greater than 0, it means that the IRR is greater than the MARR, indicating that the investment is good.

b. If the NPV and the equivalent annual worth are both equal to 0, it means that the IRR is equal to the MARR, and the investment can be considered acceptable but not preferable.

c. If the NPV and the equivalent annual worth are both less than 0, it means that the IRR is less than the MARR, indicating that the investment is not good and should be avoided.