Which of the Following Statements Concerning the IRR Is True

question 9

Multiple Choice

Which of the following statements concerning the IRR is true?

• A) The IRR does not take account of the time value of money.
• B) The IRR does not take account of the all the project cash flows.
• C) The IRR is the sum of the discounted cash flows of a project.
• D) The IRR is the discount rate that, when applied to a project's cash flows, gives an NPV of zero.

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Definitions:

Equilibrium Quantity

The quantity of goods or services that is supplied and demanded at the point where the supply and demand curves intersect.

Diminishing Marginal Utility

The principle that says additional units of a good or service provide less added satisfaction than previous units.

Risk-Averse

describes an individual or entity that prefers to minimize risk, choosing options that are deemed safer or involve less uncertainty.

Insurance Premiums

Payments made to an insurance company in exchange for coverage against specified risks over a period.