The Internal Rate of Return (IRR) on a Proposed Investment

question 28

Multiple Choice

The internal rate of return (IRR) on a proposed investment is the discount rate that makes the net present value of the investment:

• A) greater than zero
• B) equal to zero
• C) less than zero
• D) greater than the opportunity cost of not investing

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Definitions:

Quantity Change

An alteration in the amount of goods or services supplied or demanded in a market.

Average Fixed

The fixed costs of production divided by the quantity of output produced, illustrating how those costs are spread over output.

Average Fixed Cost

The fixed costs of production divided by the quantity of output produced.

Total Output

The total quantity of goods or services produced by an individual, firm, industry, or economy.