Xtreme Ltd wants to use IRR to make their decision upon a project. After a series of

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Question:

Xtreme Ltd wants to use IRR to make their decision upon a project. After a series of investigations and analysis, the company has found out that this project is risker than the company's usual projects, and therefore an additional 4%risk premium is asked. Assuming that the cost of capital for the company is 9% and relying upon the results from the investigation, the NPV projected by the company is subsequently greater than 0.

What was the discount rate applied by the company to calculate the NPV?

Would the IRR of this project be higher or lower than the discount rate used for the NPV computation? Justify your answer. You are not required to calculate the IRR to answer this question.