Final answer:
The correct answer is that the investment should be qualitatively considered before selection if its IRR is higher than the firm's hurdle rate. This selection process does not automatically imply a negative NPV or higher risk compared to the firm's overall risk. The correct option is C.
Step-by-step explanation:
If an investment's Internal Rate of Return (IRR) is higher than the firm's chosen hurdle rate, the correct response is that the investment should be qualitatively considered before selection (Option C).
This is because a higher IRR indicates that the investment is expected to generate returns greater than the minimum threshold set by the company for project acceptance, known as the hurdle rate.
Option A, which suggests the investment has a negative Net Present Value (NPV) is incorrect because a higher IRR typically correlates with a positive NPV, meaning the present value of future cash flows from the investment exceeds the initial cost.
Option B, stating the investment is of greater risk than the overall risk of the firm is also incorrect, as the IRR itself does not provide information about the risk profile of the investment compared to the firm's overall risk.