Which of the following statement/s related to the internal rate of return (IRR) are correct 1....
Which of the following statement/s related to the internal rate of return (IRR) are correct
1. The IRR is the discount rate at which an investment's NPV equals zero
2. An Investment should be undertaken if the discount rate exceeds the IRR
3. The IRR tends to be used more than net present value simply because its results are easier to comprehend.
4. The IRR is the best tool available for deciding between mutually exclusive investments
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1. 1 and 2 only |
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2. 1 and 3 only |
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3. 2 and 3 only |
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4. 1, 2, and 4 |
Homework Answers
Answer is 2. 1 and 3 only.
The Internal rate of return is a rate at which the net present value of the project is equal to zero. However, the acceptability of project on the basis of IRR can be easily derived as the project with higher IRR and above Cost of capital shall be accpeted.
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Which of the following
statement/s related to the internal rate of return (IRR) are
correct
1....
Which of the following statements is correct? The internal rate of return (IRR) does not allow...
Which of the following statements is correct? The internal rate of return (IRR) does not allow you to determine whether mutually exclusive projects are acceptable. The net present value (NPV) is the only capital budgeting technique that allows you to determine which independent projects are acceptable. The net present value (NPV) technique provides an indication of the dollar benefit (on a present value basis) to the firm's shareholders of purchasing a capital budgeting project. A project's internal rate of return...
Dropdown options first 2 blanks: (internal rate of return IRR, required rate of return, modified internal...
Dropdown options first 2 blanks: (internal rate of return IRR,
required rate of return, modified internal rate of return MIRR)
Dropdown options 3rd blank: (NPV method, IRR method)
If projects are mutually exclusive, only one project can be chosen. The internal rate of return (IRR) and the net present value (NPV) methods will not always choose the same project. If the crossover rate on the NPV profile is below the horizontal axis, the methods will agree. always Projects Y and...
Capital Budgeting Decision Criteria: IRR IRR A project's internal rate of return (IRR) is the -Select-compound...
Capital Budgeting Decision Criteria: IRR IRR A project's internal rate of return (IRR) is the -Select-compound ratediscount raterisk-free rateCorrect 1 of Item 1 that forces the PV of its inflows to equal its cost. The IRR is an estimate of the project's rate of return, and it is comparable to the -Select-YTMcoupongainCorrect 2 of Item 1 on a bond. The equation for calculating the IRR is: CFt is the expected cash flow in Period t and cash outflows are treated...
IRR A project's internal rate of return (IRR) is the -Select- The IRR is an estimate...
IRR A project's internal rate of return (IRR) is the -Select- The IRR is an estimate of the project's rate of return, and it is comparable to the -Select-on a bond. The equation for calculating the IRR is: ;that forces the PV of its inflows to equal its cost. CF2 CFN 1 IRF 1 IRF 1IR CFt t-1 (1 +IRR) CFt is the expected cash flow in Period t and cash outflows are treated as negative cash flows. There must...
4. Internal rate of return (IRR) The internal rate of return (IRR) refers to the compound...
4. Internal rate of return (IRR) The internal rate of return (IRR) refers to the compound annual rate of return that a project generates based on its up-front cost and subsequent cash flows. Consider the case of Blue Llama Mining Company: Blue Llama Mining Company is evaluating a proposed capital budgeting project (project Sigma) that will require an initial investment of $800,000. The company has been basing capital budgeting decisions on a project's NPV; however, its new CFO wants to...
2. Internal rate of return (IRR) The internal rate of return (IRR) refers to the compound...
2. Internal rate of return (IRR) The internal rate of return (IRR) refers to the compound annual rate of return that a project generates based on its up-front cost and subsequent cash flows. Consider the case of Blue Llama Mining Company: Blue Llama Mining Company is evaluating a proposed capital budgeting project (project Sigma) that will require an initial investment of $850,000. Blue Llama Mining Company has been basing capital budgeting decisions on a project's NPV; however, its new CFO...
2. Internal rate of return (IRR) The internal rate of return (IRR) refers to the compound annual rate of return th...
2. Internal rate of return (IRR) The internal rate of return (IRR) refers to the compound annual rate of return that a project generates based on its up-front cost and subsequent cash flows. Consider the case of Blue Uama Mining Company: Blue Llama Mining Company is evaluating a proposed capital budgeting project (project Sigma) that will require an initial investment of $900,000. Blue Llama Mining Company has been basing capital budgeting decisions on a project's NPV; however its new CFO...
2. Internal rate of return (IRR) Aa Aa E The internal rate of return (IRR) refers...
2. Internal rate of return (IRR) Aa Aa E The internal rate of return (IRR) refers to the compound annual rate of return that a project generates based on its up-front cost and subsequent cash flows. Consider the case of Pellegrini Southern Inc.: Pellegrini Southern Inc. is evaluating a proposed capital budgeting project (project Sigma) that will require an initial investment of $800,000. Pellegrini Southern Inc. has been basing capital budgeting decisions on a project's NPV; however, its new CFO...
First Blank: always, sometimes, never Second Blank: IRR, MIRR, required rate of return Third Blank: IRR,...
First Blank: always, sometimes, never
Second Blank: IRR, MIRR, required rate of return
Third Blank: IRR, MIRR, required rate of return
Fourth Blank: IRR method, NPV method
6. Understanding the NPV profile If projects are mutually exclusive, only one project can be chosen. The internal rate of return (IRR) and the net present value (NPV) methods will not always choose the same project. If the crossover rate on the NPV profile is below the horizontal axis, the methods will agree....
The internal rate of return (IRR) is a capital budgeting project's expected return. Which of the...
The internal rate of return (IRR) is a capital budgeting project's expected return. Which of the following statements about the IRR method is true? Because of the uncertainty connected with risky cash flows, the realized return will almost surely be different from the IRR. Decision rule for IRR: undertake the capital budgeting project only if the IRR equals r, the project's cost of capital. If the cost of capital (required return) equals the IRR (expected return), the NPV is greater...
Dropdown options first 2 blanks: (internal rate of return IRR,
required rate of return, modified internal rate of return MIRR)
Dropdown options 3rd blank: (NPV method, IRR method)
If projects are mutually exclusive, only one project can be chosen. The internal rate of return (IRR) and the net present value (NPV) methods will not always choose the same project. If the crossover rate on the NPV profile is below the horizontal axis, the methods will agree. always Projects Y and...
IRR A project's internal rate of return (IRR) is the -Select- The IRR is an estimate of the project's rate of return, and it is comparable to the -Select-on a bond. The equation for calculating the IRR is: ;that forces the PV of its inflows to equal its cost. CF2 CFN 1 IRF 1 IRF 1IR CFt t-1 (1 +IRR) CFt is the expected cash flow in Period t and cash outflows are treated as negative cash flows. There must...
4. Internal rate of return (IRR) The internal rate of return (IRR) refers to the compound annual rate of return that a project generates based on its up-front cost and subsequent cash flows. Consider the case of Blue Llama Mining Company: Blue Llama Mining Company is evaluating a proposed capital budgeting project (project Sigma) that will require an initial investment of $800,000. The company has been basing capital budgeting decisions on a project's NPV; however, its new CFO wants to...
2. Internal rate of return (IRR) The internal rate of return (IRR) refers to the compound annual rate of return that a project generates based on its up-front cost and subsequent cash flows. Consider the case of Blue Llama Mining Company: Blue Llama Mining Company is evaluating a proposed capital budgeting project (project Sigma) that will require an initial investment of $850,000. Blue Llama Mining Company has been basing capital budgeting decisions on a project's NPV; however, its new CFO...
2. Internal rate of return (IRR) The internal rate of return (IRR) refers to the compound annual rate of return that a project generates based on its up-front cost and subsequent cash flows. Consider the case of Blue Uama Mining Company: Blue Llama Mining Company is evaluating a proposed capital budgeting project (project Sigma) that will require an initial investment of $900,000. Blue Llama Mining Company has been basing capital budgeting decisions on a project's NPV; however its new CFO...
2. Internal rate of return (IRR) Aa Aa E The internal rate of return (IRR) refers to the compound annual rate of return that a project generates based on its up-front cost and subsequent cash flows. Consider the case of Pellegrini Southern Inc.: Pellegrini Southern Inc. is evaluating a proposed capital budgeting project (project Sigma) that will require an initial investment of $800,000. Pellegrini Southern Inc. has been basing capital budgeting decisions on a project's NPV; however, its new CFO...
First Blank: always, sometimes, never
Second Blank: IRR, MIRR, required rate of return
Third Blank: IRR, MIRR, required rate of return
Fourth Blank: IRR method, NPV method
6. Understanding the NPV profile If projects are mutually exclusive, only one project can be chosen. The internal rate of return (IRR) and the net present value (NPV) methods will not always choose the same project. If the crossover rate on the NPV profile is below the horizontal axis, the methods will agree....
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