Question

The internal rate of return : (mark all that applies) does not need a required rate to calculate. rule states that a typical investment project with an IRR that is less than the required rate of return should be accepted. is the more sound decision rule when dealing with mutually exclusive projects is the rate that causes the net present value of a project to exactly equal zero. can effectively be used to analyze all investment scenarios.

Answer 1

Answer:

does not need a required rate to calculate

is the rate at which npv is zero

Explanation:

Internal rate of return is an example of capital budgeting method

Internal rate of return is the discount rate that equates the after-tax cash flows from an investment to the amount invested.

Projects with the IRR greater than the discount rate should be accepted. It means that it is profitable.

Projects with more than one negative cash flow are unsuitable for calculating with IRR. This is because it can lead to multiple IRR, Thus, it not suitable for analysing all investment scenarios.

The net present value is the most preferred capital budgeting method

Other capital budgeting methods includes

1. profitability index = 1 + (NPV / Initial investment)  

2. Accounting rate of return = Average net income / Average book value  

3. Payback calculates the amount of time it takes to recover the amount invested in a project from it cumulative cash flows

4. Net present value is the present value of after-tax cash flows from an investment less the amount invested.