Which of the Following Statements Best Describes the IRR Method

question 60

Multiple Choice

Which of the following statements best describes the IRR method?

• A) One defect of the IRR method is that it does not take account of cash flows over a project's full life.
• B) One defect of the IRR method is that it does not take account of the time value of money.
• C) One defect of the IRR method is that it does not take account of the cost of capital.
• D) One defect of the IRR method is that it assumes that the cash flows to be received from a project can be reinvested at the IRR itself, and that assumption is often not valid.

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Definitions:

Selling and Administrative Expense Budget

An estimation of the costs related to sales and administrative activities for a specific period, used for planning and control.

Direct Materials

Raw materials that can be directly associated with the production of specific goods or services.

Direct Labor

The wages and benefits paid for labor that is directly involved in the production of goods or the provision of services.

Variable Selling

This term likely refers to variable selling expenses, which are costs that fluctuate with sales volume, such as commissions or shipping fees.