The Internal Rate of Return Tends to Be

question 75

Multiple Choice

The internal rate of return tends to be:

• A)easier for managers to comprehend than the net present value.
• B)extremely accurate even when cash flow estimates are faulty.
• C)ignored by most financial analysts.
• D)used primarily to differentiate between mutually exclusive projects.
• E)utilized in project analysis only when multiple net present values apply.

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Definitions:

Straight-Line Depreciation

A method of calculating the depreciation of an asset, where the expense is evenly distributed over its useful life.

Accounting Rate of Return

A metric used to measure the profitability of investments, calculated by dividing the average net income by the initial investment cost.

Break-Even Time

Break-even time is the period it takes for a business or project to become financially viable, covering all its costs and starting to generate profit.