The Internal Rate of Return

question 96

Multiple Choice

The internal rate of return:

• A) ignores the time value of money.
• B) equates a project's cash inflows with its cash outflows.
• C) equates a project's cash outflows with its expenses.
• D) equates the present value of a project's cash inflows with the present value of the cash outflows.
• E) equates the present value of a project's cash flows with the future value of the project's cash flows.

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Definitions:

Residual Value

The estimated amount that an asset will realize upon its disposal at the end of its useful life, less the cost of disposal, if any.

Accumulated Depreciation

The total amount of depreciation expense that has been charged against an asset since it was acquired.

Gain on Sale

The profit earned from selling an asset for more than its purchase price.

Net Realisable Value

The projected sales price under normal business operations minus the anticipated expenses to complete and the estimated costs required for the sale.