Which One of the Following Is True for the IRR

question 93

Multiple Choice

Which one of the following is true for the IRR method?

• A)It assumes cash proceeds can be reinvested to earn the same rate of return as the cost of capital or desired rate of return on that particular project.
• B)Unlike the NPV method,it assumes only a single discount rate.
• 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:

IFRS

International Financial Reporting Standards, a set of accounting principles that establish how transactions and other accounting events should be reported in financial statements on a global scale.

Fair Value

The estimated price at which an asset could be bought or sold in a current transaction between willing parties.

GAAP

Generally Accepted Accounting Principles, a set of rules and standards for financial reporting used in the United States.

Assets Reporting

The process of documenting and disclosing the value and details of a company’s assets in financial statements.