In Using the Internal Rate of Return Method

question 82

Multiple Choice

In using the Internal Rate of Return method

• A)management can ignore the cost of capital for the project.
• B)management must understand its own required rate of return for projects.
• C)the Net Present Value method can be ignored in assessing the project.
• D)both the Net Present Value and Cash Payback methods can be ignored in assessing the project.

Understand the practical implications and limitations of capital budgeting techniques.

Recognize the importance of cash flow timing and its effect on project viability through the payback method.

Understand the principles and applications of the Net Present Value (NPV) and Equivalent Annual Annuity (EAA) method for evaluating projects.

Identify and explain the limitations and advantages of the replacement chain method in capital budgeting.

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Definitions:

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