Question: As the general manager of a firm, you are presented with an investment proposal from one of your divisions. Its net present value, if discounted at the cost of capital for your firm (which is 15 percent), is $ 1 00,000, and its internal rate of return is 20 percent.
(a) What are the economic interpretations of the net present value and internal rate of return figures? In other words, what do they mean?
(b) What, if any, additional information would you like to have before approving the project?