Question

True or false and why? 5. The internal rate of return (IRR) is such a discount...

True or false and why?
5. The internal rate of return (IRR) is such a discount rate that ensures the sum of present value of the cash outflows (or costs) with the sum of future value of the cash inflows.
6. A basic rule in capital budgeting is that if a projects NPV is larger than or equal to its IRR, then the project should be accepted.
0 0
Add a comment Improve this question Transcribed image text
Answer #1

The internal rate of return (IRR) is such a discount rate that ensures the sum of present value of the cash outflows (or costs) with the sum of future value of the cash inflows.

Statement is false

Because at IRR the net present value of project is Zero

A basic rule in capital budgeting is that if a projects NPV is larger than or equal to its IRR, then the project should be accepted.

Statement is True

Project is acceptable when NPV is postive or where the IRR is greater than cost of capital

Add a comment
Know the answer?
Add Answer to:
True or false and why? 5. The internal rate of return (IRR) is such a discount...
Your Answer:

Post as a guest

Your Name:

What's your source?

Earn Coins

Coins can be redeemed for fabulous gifts.

Not the answer you're looking for? Ask your own homework help question. Our experts will answer your question WITHIN MINUTES for Free.
Similar Homework Help Questions
  • The internal rate of return (IRR) is such a discount rate that ensures the sum of...

    The internal rate of return (IRR) is such a discount rate that ensures the sum of present value of the cash outflows (or costs) with the sum of future value of the cash inflows True or False

  • The internal rate of return (IRR) is such a discount rate that ensures the sum of...

    The internal rate of return (IRR) is such a discount rate that ensures the sum of present value of the cash outflows (or costs) with the sum of future value of the cash inflows T/F

  • IRR A project's internal rate of return (IRR) is the -Select- The IRR is an estimate...

    IRR A project's internal rate of return (IRR) is the -Select- The IRR is an estimate of the project's rate of return, and it is comparable to the -Select-on a bond. The equation for calculating the IRR is: ;that forces the PV of its inflows to equal its cost. CF2 CFN 1 IRF 1 IRF 1IR CFt t-1 (1 +IRR) CFt is the expected cash flow in Period t and cash outflows are treated as negative cash flows. There must...

  • 18. Which of the following is NOT true about the internal rate of return: A) A...

    18. Which of the following is NOT true about the internal rate of return: A) A good project is one with IRR greater than the required return. B) IRR is the discount rate that results in a zero net present value for the project. C) Crossover rate for two projects is the IRR of the project with the difference of the cash flows of the two projects.. D) For two projects of the same size, IRR will usually choose the...

  • Capital Budgeting Decision Criteria: IRR IRR A project's internal rate of return (IRR) is the -Select-compound...

    Capital Budgeting Decision Criteria: IRR IRR A project's internal rate of return (IRR) is the -Select-compound ratediscount raterisk-free rateCorrect 1 of Item 1 that forces the PV of its inflows to equal its cost. The IRR is an estimate of the project's rate of return, and it is comparable to the -Select-YTMcoupongainCorrect 2 of Item 1 on a bond. The equation for calculating the IRR is: CFt is the expected cash flow in Period t and cash outflows are treated...

  • СР, 0 A project's internal rate of return (IRR) is the -Select- that forces the PV...

    СР, 0 A project's internal rate of return (IRR) is the -Select- that forces the PV of its inflows to equal its cost. The IRR is an estimate of the project's rat of return, and it is comparable to the - Select on a bond. The equation for calculating the IRR is: NPV = CF. + CF + СР + ... + =0 (1 + IRR) (1 + ru (1 + R) CF (1 + IRR) CFt is the expected...

  • 4. Internal rate of return (IRR) The internal rate of return (IRR) refers to the compound...

    4. Internal rate of return (IRR) The internal rate of return (IRR) refers to the compound annual rate of return that a project generates based on its up-front cost and subsequent cash flows. Consider the case of Blue Llama Mining Company: Blue Llama Mining Company is evaluating a proposed capital budgeting project (project Sigma) that will require an initial investment of $800,000. The company has been basing capital budgeting decisions on a project's NPV; however, its new CFO wants to...

  • 2. Internal rate of return (IRR) The internal rate of return (IRR) refers to the compound...

    2. Internal rate of return (IRR) The internal rate of return (IRR) refers to the compound annual rate of return that a project generates based on its up-front cost and subsequent cash flows. Consider the case of Blue Llama Mining Company: Blue Llama Mining Company is evaluating a proposed capital budgeting project (project Sigma) that will require an initial investment of $850,000. Blue Llama Mining Company has been basing capital budgeting decisions on a project's NPV; however, its new CFO...

  • 2. Internal rate of return (IRR) The internal rate of return (IRR) refers to the compound annual rate of return th...

    2. Internal rate of return (IRR) The internal rate of return (IRR) refers to the compound annual rate of return that a project generates based on its up-front cost and subsequent cash flows. Consider the case of Blue Uama Mining Company: Blue Llama Mining Company is evaluating a proposed capital budgeting project (project Sigma) that will require an initial investment of $900,000. Blue Llama Mining Company has been basing capital budgeting decisions on a project's NPV; however its new CFO...

  • 2. Internal rate of return (IRR) Aa Aa E The internal rate of return (IRR) refers...

    2. Internal rate of return (IRR) Aa Aa E The internal rate of return (IRR) refers to the compound annual rate of return that a project generates based on its up-front cost and subsequent cash flows. Consider the case of Pellegrini Southern Inc.: Pellegrini Southern Inc. is evaluating a proposed capital budgeting project (project Sigma) that will require an initial investment of $800,000. Pellegrini Southern Inc. has been basing capital budgeting decisions on a project's NPV; however, its new CFO...

ADVERTISEMENT
Free Homework Help App
Download From Google Play
Scan Your Homework
to Get Instant Free Answers
Need Online Homework Help?
Ask a Question
Get Answers For Free
Most questions answered within 3 hours.
ADVERTISEMENT
ADVERTISEMENT
ADVERTISEMENT