If a Project Has an Internal Rate of Return of 25

question 42

Multiple Choice

If a project has an internal rate of return of 25% and a negative net present value,which of the following statements is true regarding the discount rate used for the net present value computation?

• A)The required rate of return must have been 0%.
• B)The required rate of return must have been equal to 25%.
• C)The required rate of return must have been less than 25%.
• D)The required rate of return must have been greater than 25%
• E)None of the answer choices is correct.

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Definitions:

Fixed Overhead

Regular, consistent costs incurred by a business that are not affected by the level of goods or services produced, such as rent and salaries.

Budget Variance

The difference between the budgeted or planned amount of expenses or revenues, and the actual amount incurred or earned.

Predetermined Overhead Rate

A rate calculated before the period begins, used to allocate manufacturing overhead to products based on a specific activity base.

Volume Variance

The difference between planned production volumes and actual production volumes, and its effect on budgeted costs.