Asked by
Kelsey Carpenter
on Oct 10, 2024Verified
A company has unlimited funds to invest at its discount rate.The company should invest in all projects having:
A) an internal rate of return greater than zero.
B) a net present value greater than zero.
C) a simple rate of return greater than the discount rate.
D) a payback period less than the project's estimated life.
Internal Rate
Refers to the calculation used to estimate the profitability of potential investments, specifically the internal rate of return (IRR) on a project.
Net Present Value
The difference between the present value of cash inflows and the present value of cash outflows over a period of time, used for analyzing the profitability of investments or projects.
Discount Rate
The interest rate used in discounted cash flow (DCF) analyses to determine the present value of future cash flows.
- Acquire knowledge on how preference and screening decisions diverge in capital budgeting.
Verified Answer
RS
Learning Objectives
- Acquire knowledge on how preference and screening decisions diverge in capital budgeting.