Which One of the Following Statements Related to the Internal

question 90

Multiple Choice

Which one of the following statements related to the internal rate of return (IRR) is correct? 

• A) The IRR yields the same accept and reject decisions as the net present value method given mutually exclusive projects. 
• B) A project with an IRR equal to the required return would reduce the value of a firm if accepted. 
• C) The IRR is equal to the required return when the net present value is equal to zero. 
• D) Financing type projects should be accepted if the IRR exceeds the required return. 
• E) The average accounting return is a better method of analysis than the IRR from a financial point of view. 

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Definitions:

Limited Partnership

A partnership arrangement in which some partners are only liable up to the amount of their investment, unlike general partners who have unlimited liability.

Limited Liability Company

A business structure that combines the pass-through taxation of a partnership or sole proprietorship with the limited liability of a corporation.

Liability for Losses

The obligation of an individual or entity to compensate for damages or financial losses incurred by another.

Limited Partner

An investor in a partnership whose liability is limited to the amount of the investment and who does not participate in day-to-day management.