Which One of the Following Is True for the Internal

question 111

Multiple Choice

Which one of the following is true for the internal rate of return (IRR) method?

• A) It assumes cash proceeds during the life of a project can be reinvested to earn the same rate of return as the weighted-average cost of capital.
• B) Depending on the pattern of after-tax cash flows, multiple IRRs for a given proposed investment are possible.
• C) IRRs of multiple projects are additive (that is, can be added together).
• D) It can be used to make optimal decisions regarding mutually exclusive investment projects.
• E) It makes it easy to incorporate multiple costs of capital.

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Definitions:

Defensive Pessimism

A strategy where individuals set low expectations for their performance in order to prepare for possible negative outcomes.

Cognitive Strategy

Approaches or techniques that an individual employs to process information, solve problems, and enhance learning or memory.

Worse Performance

A lower level of achievement or effectiveness in carrying out a task or duty compared to expected or previous results.

Better Performance

An improvement in efficiency, accuracy, or quality of work or activity when compared to a previous level.