The Internal Rate of Return Rule Can Result in the Wrong

question 13

Multiple Choice

The internal rate of return rule can result in the wrong decision if the projects being compared have:

• A)differences in scale.
• B)differences in timing.
• C)differences in NPV.
• D)A and B are correct.

---

Definitions:

Future Value

Future value is the value of a current asset at a specified date in the future based on an assumed rate of growth over time.

Compounded Monthly

Interest calculation where interest is added to the principal balance each month, leading to an increase in the total interest earned over time.

Ordinary Annuity

A sequence of identical payments made consistently during a defined timeframe.

Compounded Semi-Annually

Interest calculation method where the interest is added to the principal at half-year intervals, leading to an increase in the amount of subsequent interest.