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:

Insightful

Having or showing an accurate and deep understanding; perceptive.

Availability Heuristic

A mental shortcut that relies on immediate examples that come to a person’s mind when evaluating a specific topic, concept, method or decision.

Planning Fallacy

The tendency to underestimate the time, costs, and risks of future actions and at the same time overestimate the benefits of the same actions.

Intelligence

The ability to learn from experience, solve problems, and use knowledge to adapt to new situations.