The Internal Rate of Return Tends to Be

question 53

Multiple Choice

The internal rate of return tends to be:

• A) easier for managers to comprehend than the net present value.
• B) extremely accurate even when cash flow estimates are faulty.
• C) ignored by most financial analysts.
• D) used primarily to differentiate between mutually exclusive projects.
• E) utilized in project analysis only when multiple net present values apply.

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Definitions:

Income Effect

Adjustments in the financial earnings of an individual or an economy and the corresponding effect on the quantity of goods or services demanded.

Indifference Curve

A graph showing different combinations of two goods that give a consumer equal satisfaction and utility.

Utility Level

A measure of the satisfaction or happiness that individuals get from the consumption of goods and services.

Indifference Curve

A graph depicting combinations of goods that give the consumer equal satisfaction and utility.