The Internal Rate of Return (IRR) for an Investment

question 7

Multiple Choice

The internal rate of return (IRR) for an investment:

• A) Frequently results in positive net present value (NPV) on attractive projects.
• B) Generally coincides with the company's discount rate.
• C) Disregards discounted cash flows.
• D) On mutually exclusive projects may produce different project rankings than those produced by using the net present value (NPV) method.
• E) Would tend to be reduced if a company used an accelerated method of depreciation for tax purposes rather than the straight-line (SL) method.

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Definitions:

Fixed Assets

Tangible assets, such as buildings, machinery, and equipment, used in the operations of a business that are not intended for sale.

Insurance Policy

A contract between an insurer and policyholder specifying the terms for the payment of claims to the insured or their beneficiaries in the event of a covered loss.

Adjusting Entry

A journal entry made at the end of an accounting period to allocate income and expenditures to the appropriate accounting period.

Debit

An accounting entry that results in either an increase in assets or a decrease in liabilities or equity on a company's balance sheet.