Asked by
Paige De’Avion
on Nov 19, 2024
Verified
If the net present value of a project is zero based on a discount rate of 16%, then the internal rate of return is:
A) equal to 16%.
B) less than 16%.
C) greater than 16%.
D) cannot be determined from this data.
Net Present Value
A method used to evaluate the profitability of an investment, calculating the difference between the present value of cash inflows and outflows over a period.
Discount Rate
The interest rate used in discounted cash flow (DCF) analyses to determine the present value of future cash flows.
- Discern between distinct methodologies for investment appraisal such as the Profitability Index, Internal Rate of Return (IRR), and Net Present Value (NPV), focusing on their utilization for investment project prioritization.
- Identify the inherent reinvestment assumption in both the Internal Rate of Return and Net Present Value methods.
Verified Answer
TA
Learning Objectives
- Discern between distinct methodologies for investment appraisal such as the Profitability Index, Internal Rate of Return (IRR), and Net Present Value (NPV), focusing on their utilization for investment project prioritization.
- Identify the inherent reinvestment assumption in both the Internal Rate of Return and Net Present Value methods.
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