Final answer:
The NPV will be positive if the IRR exceeds the hurdle rate, indicating that the investment is financially beneficial and promising returns above the minimum required. Therefore, the correct answer is a) Positive.
Step-by-step explanation:
When determining the attractiveness of an investment, the Internal Rate of Return (IRR) is compared with the hurdle rate, which is the minimum return an investor expects to achieve. If the IRR exceeds the hurdle rate, the investment is considered to be financially beneficial as it promises returns over the minimum required. As such, the Net Present Value (NPV) will be positive when the IRR is higher than the hurdle rate because the projected cash flows from the investment will exceed the initial cost when discounted back at the hurdle rate.
If the IRR exceeds the hurdle rate, it indicates that the investment project is expected to generate a higher return than the cost of capital. In this case, the NPV (Net Present Value) of the project will be positive. The NPV is a measure of the profitability of an investment and represents the difference between the present value of cash inflows and the present value of cash outflows. For example, let's say a company has a hurdle rate of 10% and the IRR of an investment project is 15%. The NPV will be positive, indicating that the project is expected to generate a higher return than the cost of capital.