The Internal Rate of Return (IRR) for an Investment

question 27

Multiple Choice

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

• A) Frequently results in positive net present values on attractive projects.
• B) Generally is greater than the company's desired rate of return.
• C) Ignores the time value of money.
• D) May produce different results than the net present value method (NPV) in evaluating projects with different useful lives.
• E) Would tend to be reduced if a company used an accelerated method of depreciation for tax purposes.

---

Definitions:

Direct Labor

The wages and related costs of employees who are directly involved in the production of goods or services.

Direct Materials Cost

The cost of raw materials that can be directly traced to the production of goods, excluding indirect materials like maintenance supplies.

Finished Goods Inventory

Finished products awaiting sale but still not purchased.

Overhead Rate

The ratio used to allocate indirect costs to products or services, based on a specific measure such as labor hours or machine hours.