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:

Deposits

Funds placed into an account at a banking institution for safekeeping.

Money Market Mutual Funds

Investment funds that pool money from investors to purchase low-risk, short-term securities like Treasury bills and commercial paper.

M2

A measure of the money supply that includes cash, checking deposits, and easily convertible near money, such as savings deposits and money market securities.

Corporate Bonds

Corporate bonds are debt securities issued by corporations to finance their operations, expansion, and other projects, offering interest payments to holders.