Modified Internal Rate of Return

question 56

Multiple Choice

Modified internal rate of return:

• A)handles the multiple IRR problem by combining cash flows until only one change in sign change remains.
• B)requires the use of a discount rate.
• C)does not require the use of a discount rate.
• D)Both A and B.
• E)Both A and C.

---

Definitions:

Contribution Margin

The amount that one unit contributes to profit. It is defined as price minus marginal cost.

Fixed Costs

Expenses that do not change with the level of goods or services produced by a business, such as rent, salaries, or insurance premiums.

Break-Even Quantity

The amount you need to sell to at least break even (make zero profit). The formula (assuming that you can sell all you want at price and with constant marginal cost) is Q = F/(P - MC), where F is fixed costs, P is price, and MC is marginal cost.

Zero Profits

Zero profits, or normal profit, occur when a company's total revenues exactly match total costs, leaving no net profit or loss.