Select the Incorrect Statement Concerning the Internal Rate of Return

question 2

Multiple Choice

Select the incorrect statement concerning the internal rate of return (IRR) method of evaluating capital projects.

• A) The higher the IRR the better.
• B) The internal rate of return is that rate that makes the present value of the initial outlay equal to zero.
• C) If a project has a positive net present value then its IRR will exceed the hurdle rate.
• D) A project whose IRR is less than the cost of capital should be rejected.

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Definitions:

Entire Output

The entire output contract is a commercial agreement in which a buyer agrees to purchase all of a seller's production of a specific good or service.

Intent Of The Parties

The actual and mutual intention of all parties involved in a contract or agreement, determined from their actions and words.

Certain Terms

Specific, clearly defined provisions within a contract or agreement that detail the expectations, duties, and rights of all parties involved.

Subject Matter

The topic or substance of a document, discussion, or work, especially referring to the content of a legal document or proceeding.