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:

Population Parameter

A numerical value that summarizes or describes a characteristic of an entire population.

Confidence Interval

Confidence interval is a range of values, derived from sample statistics, that is likely to contain the value of an unknown population parameter with a certain level of confidence.

Population Standard Deviation

Population standard deviation is a measure of the dispersion or variation in a set of values from a population, calculating how spread out the values are from the population mean.

Population Mean

The average value of all elements in a population, where the population represents the entire set of interest.