When Using the Internal Rate of Return (IRR)investment Rule,we Compare

question 54

Multiple Choice

When using the internal rate of return (IRR) investment rule,we compare:

• A)the average return on the investment opportunity to returns on all other investment opportunities in the market.
• B)the average return on the investment opportunity to returns on other alternatives in the market with equivalent risk and maturity.
• C)the NPV of the investment opportunity to the average return on the investment opportunity.
• D)the average return on the investment opportunity to the risk-free rate of return.

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Definitions:

Deadweight Loss

A loss of economic efficiency that can occur when the equilibrium for a good or service is not achieved or is unattainable.

Units Bought

Refers to the quantity of a particular good or service purchased by consumers or businesses.

Tax Imposed

A financial charge or other levy placed upon an individual or a legal entity by a state or a functional equivalent of a state.

Consumer Surplus

The difference between the amount consumers are willing to pay for a good or service versus what they actually pay.