The Internal Rate of Return

question 71

Multiple Choice

The internal rate of return

• A)is more reliable as a decision making tool than net present value when considering mutually exclusive projects.
• B)is the discount rate that makes the net present value of a project equal to one.
• C)is easier to apply than net present value when cash flows are unconventional.
• D)will provide the same accept/reject decision as NPV when cash flows are conventional and projects are independent.
• E)is influenced by daily changes in the market rate of interest.

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Definitions:

Regressive

A term used to describe a tax system in which the tax rate decreases as the taxpayer's income increases, placing a larger burden on lower-income earners.

Ability-to-Pay Principle

A taxation principle that argues taxes should be levied according to an individual's or entity's capability to bear the tax burden.

Income Taxes

Taxes levied by governments on individuals or corporations' income, where the tax rate may increase as the taxable amount increases.

Excise Taxes

Taxes imposed on the sale of specific goods and services, such as tobacco, alcohol, and gasoline, usually aimed at discouraging their consumption or generating revenue.