A Project Is Profitable If Its Internal Rate of Return

question 33

Multiple Choice

A project is profitable if its internal rate of return:

• A)Exceeds its discount rate.
• B)Is zero.
• C)Exceeds cash outflows of the project.
• D)Exceeds its opportunity cost of capital.
• E)None of the above.

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Definitions:

Relevant Range

The span of activity within which certain cost behaviors and assumptions, such as fixed costs and variable rates, are expected to remain valid.

Conversion Costs

The combination of labor and overhead costs incurred to convert raw materials into finished goods.

Incurred Costs

Expenses that a company has realized and recorded, regardless of cash payment status.

Manufacturing Overhead Costs

Expenses indirectly related to the manufacturing process, including maintenance of equipment, quality control, and facility rent.