The Relationship Between NPV and IRR Is Such That

question 13

Multiple Choice

The relationship between NPV and IRR is such that:

• A)both approaches always provide the same ranking of alternative investment projects.
• B)the IRR of a project is equal to the firm's cost of capital if the NPV of a project is $0.
• C)if the NPV of a project is negative, the IRR must be greater than the cost of capital.
• D)none of these

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Definitions:

Total Material Variance

The difference between the actual material costs incurred and the expected (standard) costs, reflecting efficiency in material usage.

Direct Material Standards

The predetermined cost and quantity of raw materials that should be used in the production of a single unit of product under normal operating conditions.

Actual Production

The real quantity of goods or services produced over a specified period, as opposed to planned or expected production levels.

Direct Material Price Variance

The difference between the actual cost of direct materials used in production and the expected (or standard) cost of those materials.