medium · Principles of Finance

If a project has an IRR of 15% and a WACC of 12%, but the NPV is negative, what is the most likely explanation?

1. The WACC is higher than the IRR, leading to a negative NPV.
2. The project's scale is too large for the firm's capital budget.
3. The analyst forgot to include the initial investment in the IRR calculation.
4. The project's cash flow stream is non-conventional, and the NPV is negative at the 12% discount rate.

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