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:

Life Expectancy

The average number of years a person is expected to live, based on current mortality rates and health conditions.

Literacy Rates

The percentage of people within a given population who are capable of reading and writing at a specified age.

Nominal GDP

The aggregate monetary worth of every final good and service created inside a country during a particular period, unadjusted for inflation.

Prices

Refers to the amount of money required to purchase goods or services.