Project Alpha Has an Internal Rate of Return (IRR)of 15

question 22

Multiple Choice

Project Alpha has an internal rate of return (IRR) of 15 percent.Project Beta has an IRR of 14 percent.Both projects have a required return of 12 percent.Which of the following statements is MOST correct?

• A) Both projects have a positive net present value (NPV).
• B) Project Alpha must have a higher NPV than Project Beta.
• C) If the required return were less than 12 percent, Project Beta would have a higher IRR than Project Alpha.
• D) Project Beta has a higher profitability index than Project Alpha.

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Definitions:

Standard Costs

Predetermined costs serving as a benchmark for evaluating the actual cost performance of operations.

Measuring Efficiency

The process of evaluating the performance of a system, organization, or component by comparing its output with its input.

Variable Cost System

An accounting approach where costs that vary directly with the level of output are only recorded as product costs, contrasting with full costing methods.

Manufacturing Cost

The total expense involved in the production of goods, including materials, labor, and overhead costs.