A Company That Is Using the Internal Rate of Return

question 103

Multiple Choice

A company that is using the internal rate of return (IRR) to evaluate projects should accept a project if the IRR:

• A) is greater than the project's net present value.
• B) equates the present value of the project's cash inflows with the present value of the project's cash outflows.
• C) is greater than zero.
• D) is greater than the hurdle rate.
• E) is less than the firm's cost of investment capital.

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Definitions:

Congress

A bicameral body of government in the United States tasked with making laws, comprised of two houses: the Senate and the House of Representatives.

Trade Among States

The exchange of goods, services, or both between states within a country, subject to regulations and restrictions by the government.

Commerce Clause

A provision in the United States Constitution that grants Congress the power to regulate commerce with foreign nations, and among the several states, and with the Indian tribes.

Federal Power

Federal power encompasses the authorities and actions exercised by the federal government, as specified by the Constitution, including regulating interstate commerce, maintaining the armed forces, and creating federal laws.