Which of the following is the correct definition of internal rate of return IRR?
Which of the following is the correct definition of Internal Rate of Return (IRR)? IRR is the rate at which the present value of all future cash flows equals initial outlay.
Which one of the following indicates that a project is expected to create value for its owners?
Positive net present value.
Which one of the following is true if the managers of a firm accept only projects?
Which one of the following is true if the managers of a firm accept only projects that have a profitability index greater than 1.5? The firm should increase in value each time it accepts a new project.
Which of the following is true of the internal rate of return IRR approach to assessing investments?
Which one of the following is true of the internal rate of return (IRR) approach to assessing investments? IRR fails to take all of the cash flows into account.
Which of the following statement is correct regarding the internal rate of return method?
Answer: b ) As long as you are not dealing with mutually exclusive projects , capital rationing , or unusual projects having multiple sign changes in the cash – flow stream , the internal rate of return method can be used with reasonable confidence .
Which one of the following indicates that a project is expected to create?
Which one of the following indicates that a project is expected to create value for its owners? The net present value: decreases as the required rate of return increases.
Which one of the following indicates that a project should be rejected assume the cash flows are normal?
If the internal rate of return equals the required return, the net present value will equal zero. Which one of the following indicates that a project should be rejected? Assume the cash flows are normal, i.e., the initial cash flow is negative.
Is equal to the initial investment when the internal rate of return is equal to the required return?
The net present value: -is equal to the initial investment when the internal rate of return is equal to the required return. -method of analysis cannot be applied to mutually exclusive projects.
What is the internal rate of return quizlet?
The internal rate of return is that discount rate which equates thepresent value of the cash outflows (or costs) with the present value ofthe cash inflows. Under certain conditions, a particular project may have more than one IRR.
When a project’s internal rate of return equals its opportunity cost of capital then the?
When a project's internal rate of return equals its opportunity cost of capital, then the: net present value will be zero.
When the cost of capital of a project is equal to its internal rate of return?
Answer and Explanation: If an investment project (normal project) has an IRR equal to the cost of capital, the NPV for that project is: C. Zero.
Which of the following statements regarding internal rate of return IRR is correct Mcq?
Answer: b ) As long as you are not dealing with mutually exclusive projects , capital rationing , or unusual projects having multiple sign changes in the cash – flow stream , the internal rate of return method can be used with reasonable confidence .
Which of the following is correct in relation to internal rate of return of a project?
E: A project with investing type cash flows is acceptable if its internal rate of return exceeds the required return.
Which one of the following indicates that a project should be rejected quizlet?
Terms in this set (17) Which one of the following indicates that a project should be rejected? Assume the cash flows are normal, i.e., the initial cash flow is negative.
Which one of the following indicates that a project should be rejected?
The answer is: 4) Profitability index less than 1.0. A profitability index less than 1 is indicative of a project that should be rejected.
Is equal to the initial investment when the internal rate of return is equal to the required return quizlet?
The net present value: -is equal to the initial investment when the internal rate of return is equal to the required return. -method of analysis cannot be applied to mutually exclusive projects.
What does IRR mean in statistics?
internal rate of return The internal rate of return (IRR) is the annual rate of growth that an investment is expected to generate. IRR is calculated using the same concept as net present value (NPV), except it sets the NPV equal to zero.
When IRR is less than opportunity cost?
If the IRR of an investment is higher than its opportunity cost of capital, the investment has a positive NPV. It "creates value". It is worth considering. On the other hand, if the IRR of an investment is lower than its opportunity cost of capital, the investment represents value destruction, and should be discarded.
When using internal rate of return to evaluate investment projects if the internal rate of return is less than the required rate of return the project should be accepted?
When evaluating capital investment projects, if the internal rate of return is less than the required rate of return, the project will be accepted. When selecting a capital investment project from three alternatives, the project with the highest net present value will always be preferable.
What happens when IRR is equal to discount rate?
The IRR equals the discount rate that makes the NPV of future cash flows equal to zero.
When IRR is equal to the cost of capital then NPV is equal to zero?
IRR is a discount rate that makes the net present value (NPV) of all cash flows equal to zero in a discounted cash flow analysis. IRR calculations rely on the same formula as NPV does. Keep in mind that IRR is not the actual dollar value of the project. It is the annual return that makes the NPV equal to zero.
Is the IRR equal to the required return when the net present value is equal to zero?
The IRR is equal to the required return when the net present value is equal to zero. The internal rate of return: may produce multiple rates of return when cash flows are conventional. is best used when comparing mutually exclusive projects.
When IRR is equal to cost of capital?
If the IRR is greater than or equal to the cost of capital, the company would accept the project as a good investment.
Why is the IRR formula set equal to zero?
Why is the IRR formula set equal to zero? By definition, IRR is the interest rate that makes the summation of the present values of all the cash flows equal zero. Rate-based decision statistics are popular because managers like to compare the expected rate of return to which of these.
When net present value is zero the IRR is equal to the required rate of return?
The IRR is equal to the required return when the net present value is equal to zero. The internal rate of return: may produce multiple rates of return when cash flows are conventional. is best used when comparing mutually exclusive projects.
When the IRR is equal to the cost of capital?
If the IRR is greater than or equal to the cost of capital, the company would accept the project as a good investment.
When the IRR is equal to the cost of capital then NPV will be zero?
Answer and Explanation: If an investment project (normal project) has an IRR equal to the cost of capital, the NPV for that project is: C. Zero.
When NPV is equal to zero it means?
If a project's NPV is neutral (= 0), the project is not expected to result in any significant gain or loss for the company. With a neutral NPV, management uses non-monetary factors, such as intangible benefits created, to decide on the investment.
Why does NPV equal zero for IRR?
IRR is a discount rate that makes the net present value (NPV) of all cash flows equal to zero in a discounted cash flow analysis. IRR calculations rely on the same formula as NPV does. Keep in mind that IRR is not the actual dollar value of the project. It is the annual return that makes the NPV equal to zero.