Question

Partitioning the internal rate of return is useful because it helps the investor to determine how much of the return is from annual operating cash flow and how much is from the projected resale cash flow?
A) True
B) False

Answer 1

Answer:

A) True

Explanation:

Partitioning the internal rate of return (IRR) means dividing the returns from; cash flows from annual operating vs. cash flows from the resale of the investment.

The greater the proportion of resale cash flow, the greater the risk for the investor. The more return the investor gets from annual operating cash flows, the better.