If Project a Has a Lower Internal Rate of Return

question 5

Multiple Choice

If project A has a lower internal rate of return than project B, then project A will have a

• A) lower NPV and a shorter payback period.
• B) higher NPV and a longer payback period.
• C) lower NPV and a longer payback period.
• D) higher NPV and a shorter payback period.

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Definitions:

Weekly Cash Flows

The movement of cash in and out of a business on a weekly basis, indicating its operational liquidity position.

Annual Interest Rate

The percentage increase in money stored in a financial institution or invested, calculated on an annual basis.

Lockbox System

A service offered by banks to companies for the receipt of payment from customers, utilizing a special post office box to speed up the deposit process.

Treasury Bills

Short-term government securities issued at a discount from the face value and maturing at par, used by governments to raise funds and investors to park short-term funds.