The IRR of a Project Whose Cash Flows Accrue Relatively

question 55

True/False

The IRR of a project whose cash flows accrue relatively rapidly is more sensitive to changes in the discount rate than is the IRR of a project whose cash flows come in more slowly.

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Definitions:

Excise Tax

A tax imposed on specific goods and services, such as gasoline, cigarettes, and alcohol.

Upsloping

Describes a line or curve on a graph that moves upward as it progresses from left to right, often used to depict positive relationships between variables.

Supply Curve

A graphical representation showing the relationship between the price of a good and the quantity of that good that suppliers are willing to offer for sale, holding all else constant.

Highly Inelastic

Describes a situation where demand or supply shows little to no response to changes in price, often due to the lack of close substitutes.