The Statement Concerning the Internal Rate of Return Method of Capital

question 41

Multiple Choice

The statement concerning the internal rate of return method of capital budgeting that is true is:

• A)The interest rate that will discount future cash flows so that their present value is exactly equal to the cost of the investment is the cost of capital
• B)When the internal rate of return method is employed a direct relationship will exist between the interest rate chosen and the present value of future cash flows.
• C)When the net present value is equal to zero,the cost of capital discount rate)and the internal rate of return are equal.
• D)The internal rate of return is the discount rate that will produce a positive net present value for the investment

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Definitions:

Operant Conditioning

A method of learning that employs rewards and punishments for behavior, which in turn increases or decreases the likelihood of that behavior being repeated.

Shaping

A method of training or teaching by which successive approximations towards a desired behavior are reinforced.

Observing Models

The process of learning behaviors, attitudes, and emotional reactions through watching others, especially influential or authority figures.

Consequences

The outcomes or effects that follow from an action, behavior, or decision, influencing future choices and behaviors.