The _________ is the rate of return a firm must earn on its investment in order...
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The _________ is the rate of return a firm must earn on its investment in order to maintain the market value of its stock. |
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Homework Answers
Option (b) is correct
Internal rate of return is the rate of return a firm must earn on its investment in order to maintain the market value of its stock.
It is the rate at which the present value of cash inflows is equal to initial investment or the rate at which net present value is zero.
Option (a) is incorrect as gross profit margin is margin on sales.
Option (c) is incorrect as net present value is not the rate but it is present value of cash inflows minus present value of cash outflows.
Option (d) is incorrect as cost of capital is the opportunity cost of making the investment.
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