The Appropriate Hurdle Rate for Comparison with the IRR Is

question 15

Multiple Choice

The appropriate hurdle rate for comparison with the IRR is:

• A)that which makes the sum of the discounted future cash flows and initial investment of the project equal to the undiscounted value of the tracking portfolio of the future cash flows.
• B)that which makes the sum of the undiscounted future cash flows and initial investment of the project equal to the selling price of the tracking portfolio of the future cash flows.
• C)that which makes the sum of the discounted future cash flows and initial investment of the project equal to the selling price of the tracking portfolio of the future cash flows.
• D)that which makes the sum of the discounted future cash flows of the project equal to the undiscounted value of the tracking portfolio of the future cash flows.

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Definitions:

Direct Labour

The workforce directly involved in the manufacturing process, whose wages are considered variable costs.

Long-Range Budgets

Financial plans that project revenues, expenses, and other financial details for a period of several years into the future.

Rolling Budgets

Budgeting method that continuously updates by adding a new budget period as the current period is completed, ensuring ongoing financial planning.

Budgeted Financial Statements

Financial statements that predict revenues, expenses, and net income based on the budget for a future period.