Which of the Following Statements Concerning the Internal Rate of Return

question 4

Multiple Choice

Which of the following statements concerning the internal rate of return method of capital budgeting is correct?

• A) 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.
• B) 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.
• C) The internal rate of return is the discount rate that will produce a positive net present value for the investment.
• D) When the net present value is equal to zero, the cost of capital (discount rate) and the internal rate of return are equal.

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Definitions:

Status Quo

The existing state of affairs or the current condition or situation, often referring to a stable or unchanging condition in societal or political contexts.

Bourbon Dynasty

A European royal house of French origin, known for its significant role in the history of France and other countries.

Second Treaty of Paris

Signed in 1815, this treaty formally ended the Napoleonic Wars, imposing harsher conditions on France than the 1814 treaty, including territorial losses and indemnities.