Landy Company Is Using the Internal Rate of Return Method

question 130

Multiple Choice

Landy Company is using the internal rate of return method to decide whether to make an investment that will cost $120,000 and which is expected to generate economic resources for 5 years. Landry determines the IRR is 3.12. What information does the IRR provide?

• A) Landy expects to earn 3.12% of its investment as cash flows each year the asset is used.
• B) Landy expects to earn a 3.12% return over the life of its investment.
• C) Landy expects the asset will produce profits equal to 3.12% of the asset's cost each year.
• D) Landy expects to recover its cash over 3.12 years.

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Definitions:

External Locus

A belief system where individuals perceive their outcomes and experiences as being controlled by external forces or fate rather than their own actions.

Internal Locus

The belief that one's actions and outcomes are a result of personal decisions and efforts rather than external factors.

Self-Actualization

The need to actualize or "make actual" your unique talents and abilities.

Habituation

The psychological process by which an individual becomes accustomed to a stimulus and consequently responds less to it over time.