A Firm Evaluates All of Its Projects by Applying the IRR

question 77

Multiple Choice

A firm evaluates all of its projects by applying the IRR rule.The required return for the following project is 21 percent.The IRR is _____ percent and the firm should ______ the project.

• A)16.05 percent; reject
• B)16.05 percent; accept
• C)24.26 percent; reject
• D)26.30 percent; accept
• E)26.30 percent; reject

---

Definitions:

Implicit Costs

The opportunity costs associated with a company's use of resources that are not directly paid for or billed.

Implicit Cost

The opportunity costs that are not directly paid or incurred but represent the loss of alternative benefits when resources are used in a particular way.

Capital

A resource, such as equipment or buildings, used to produce goods and services.

Implicit Costs

The opportunity costs that are not directly paid for or visibly incurred in financial transactions but represent real costs to economic actors.