What Is the Internal Rate of Return

question 28

Multiple Choice

What is the internal rate of return?

• A)The discount rate that makes the cash inflows equal to the cash outflows.
• B)The discount rate that the firm uses to calculate the profit margin.
• C)The discount rate after adjusting for inflation.
• D)The difference between nominal and real returns.
• E)None of the above.

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Definitions:

Lessees' Balance Sheet

The financial statement that reflects the rights and obligations arising from leasing agreements, including both right-of-use assets and lease liabilities, from the perspective of the lessee.

Capital Leases

A lease that transfers substantially all risks and rewards of ownership of the asset to the lessee, effectively treated as a purchase.

Operating Leases

Leases where the lessor retains ownership of the asset, and the asset is returned after the lease term; typically involves equipment and property.

Direct Financing Capital Lease

A type of lease in which the lessor finances the leased asset, and all risks and rewards of ownership are transferred to the lessee, without actual transfer of ownership.