Which One of the Following Will Occur When the Internal

question 77

Multiple Choice

Which one of the following will occur when the internal rate of return equals the required return?

• A)The average accounting return will equal 1.0.
• B)The profitability index will equal 1.0.
• C)The profitability index will equal 0.
• D)The net present value will equal the initial cash outflow.
• E)The profitability index will equal the average accounting return.

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Definitions:

Budgeted Contribution Margin

The anticipated difference between sales revenue and variable costs in a budget period.

Variable Overhead Efficiency Variance

The difference between the actual variable overhead incurred and the standard cost of variable overhead allotted for the actual production.

Indirect Materials

Materials used in the production process that are not directly part of the final product, such as lubricants for machines.

Unfavourable Variance

A financial term referring to a situation where actual costs are higher than planned or budgeted costs, or actual revenue is lower than forecasted revenue.