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A project is accepted on the internal rate of return criterion when the rate exceeds

  • A.the project's simple payback period
  • B.the depreciation rate applied to the asset
  • C.the company's hurdle rate
  • D.the prevailing rate of inflation

Answer: C

Correct answer: the company's hurdle rate

The internal rate of return is the discount rate at which the net present value is zero, so a project earning more than the rate the company requires is worth doing. The hurdle rate reflects the cost of capital and the risk of the project, and comparing against inflation or depreciation instead answers a different question.

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