Which of the Following Is Not an Assumption of the Internal

question 18

Multiple Choice

Which of the following is not an assumption of the internal rate of return model?

• A)The amount and timing of all cash flows is known exactly.
• B)All cash flows occur at the end of the year.
• C)Cash inflows from the project are reinvested in another project earning a return equal to the internal rate of return.
• D)All of these answer choices are assumptions of the internal rate of return model.

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Definitions:

Direct Materials Dollars

The total cost of all the raw materials used in the production of a product.

Factory Overhead Rate

Factory overhead rate is the method of allocating indirect manufacturing costs, like utilities and rent, to individual units of production based on a specific allocation base.

Assembly Department

a division within a manufacturing plant where components are put together to create a final product.

Direct Labor Hour

The amount of time employees directly involved in manufacturing spend on producing a specific unit of output.