Internal Rate of Return (IRR) and Net Present Value (NPV)

question 38

Multiple Choice

Internal rate of return (IRR) and net present value (NPV) methods:

• A) generally arrive at the same accept/reject decisions
• B) are less sophisticated than the payback period
• C) cannot make use of the same cash flows
• D) can be substituted for by the payback period

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Definitions:

Competitive Price-searcher Market

A market where firms set their own prices due to product differentiation and search costs but still face competition from other firms.

Competitive Price-searcher

A market condition where firms set their prices based on the search and competition among them, yet they have some control over their prices because their products are differentiated.

Marginal Cost

Marginal cost is the additional cost incurred in the production of one more unit of a good or service.

Average Total Cost

The per unit cost of production, calculated by dividing the total costs (fixed and variable) by the total quantity of output produced.