Asked by
H?ng Ph??c Nguy?n Th?
on Nov 19, 2024
Verified
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
Typically refers to the internal rate of return (IRR), which is the discount rate that makes the net present value (NPV) of all cash flows from a particular project equal to zero.
Discount Rate
A discount rate employed to ascertain the present worth of future cash flows within discounted cash flow analysis.
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 in capital budgeting to analyze the profitability of an investment or project.
- Identify the differences among the Profitability Index, Internal Rate of Return (IRR), and Net Present Value (NPV), and understand their roles in evaluating and ranking investment opportunities.
Verified Answer
KC
Learning Objectives
- Identify the differences among the Profitability Index, Internal Rate of Return (IRR), and Net Present Value (NPV), and understand their roles in evaluating and ranking investment opportunities.