When a Project's Internal Rate of Return Equals the Discount

question 107

Multiple Choice

When a project's internal rate of return equals the discount rate,

• A)A manager has probably manipulated the analysis
• B)The net present value is zero
• C)The discount rate is equal to the industry average
• D)None of these ans choices are correct

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Definitions:

Machine-Hours

A measure of the amount of time machines are operated in the production of goods or services, used as a basis for allocating manufacturing costs.

Manufacturing Overhead

The indirect costs related to manufacturing, not including direct labor or materials, such as utility costs and maintenance expenses.

Predetermined Overhead Rate

A rate used to allocate manufacturing overhead to individual products or job orders, based on a predetermined formula.

Machine-Hours

A measure of the time a machine is run during production, used to allocate manufacturing overhead costs based on machine usage.