The Internal Rate of Return of a Capital Investment

question 59

Multiple Choice

The internal rate of return of a capital investment

• A) Changes when the required rate of return changes.
• B) Is equal to the annual net cash flows divided by one half of the project's cost when the cash flows are an annuity.
• C) Must exceed the required rate of return in order for the firm to accept the investment.
• D) Is similar to the yield to maturity on a bond.
• E) Answers c and d are both correct.

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Definitions:

Government Expenditures

Spending by government agencies on goods, services, and public projects.

Federal Reserve

The central bank of the United States, overseeing the nation's monetary policy, regulation of banks, and stability of the financial system.

Tax Decrease

A decrease in the tax rates applied to individuals or companies by governmental authorities.

Money Supply

The complete tally of economic assets in an economy at a designated moment, such as cash, coins, and money in checking and savings accounts.