The Net Present Value (NPV) Method and the Internal Rate

question 136

Multiple Choice

The net present value (NPV) method and the internal rate of return (IRR) method are used to analyze proposed capital expenditures. The IRR method, as contrasted with the NPV method:

• A) Is considered inferior because it fails to calculate compounded rates of return.
• B) Incorporates the time value of money, while the NPV method does not.
• C) Almost always gives a different decision that the NPV method as to the acceptability ("go" versus "no go") of a given proposed investment.
• D) Assumes (according to some commentators) that the rate of return on the reinvestment of the cash proceeds is at the indicated rate of return of the project analyzed rather than at the discount rate used.
• E) Is preferred in practice because it can handle multiple desired rates of return, which is impossible to do with the NPV method.

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Definitions:

Fear Neutral Stimuli

Stimuli that originally do not provoke fear responses but can become fear-inducing when associated with a negative event.

Shock

A medical emergency involving a sudden drop in blood flow throughout the body, or a strong emotional or physical response to a traumatic event.

Stimulus Generalization

The psychological phenomenon where a response to a specific stimulus is elicited by similar stimuli, indicating a lack of discrimination.

Panic Attack

A sudden onset of intense fear or discomfort, marked by various physical and psychological symptoms that occur abruptly and peak within minutes.