Which Statement Concerning the Internal Rate of Return Method of Capital

question 3

Multiple Choice

Which statement concerning the internal rate of return method of capital budgeting is true?

• 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:

Compulsion

A repetitive and rigid behavior or mental act that persons feel driven to perform in order to prevent or reduce anxiety.

Repetitive Behavior

Actions repeated over and over again, which can be a symptom of several disorders, including OCD and autism spectrum disorders.

Mental Act

A process or activity carried out by the mind, such as thinking, reasoning, or remembering.

Panic Attack

A sudden episode of intense fear or acute discomfort, accompanied by physical symptoms such as heart palpitations, dizziness, and shortness of breath.