The Internal Rate of Return

question 53

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:

Activity Rate

A measure used to assign costs to cost objects, based on the activities that drive costs in an activity-based costing system.

Activity-Based Costing

A cost allocation method that spots activities inside an organization and apportions the costs of these activities to all products and services, according to how much they actually use.

Manufacturing Overhead

All manufacturing costs that are not directly related to individual products, including costs related to indirect labor, materials, and factory operations.

Machining

The process of cutting, shaping, or removing material from a workpiece using machines.