38) The Internal Rate of Return (IRR) is the interestrate whereby NPV equals zero.

TRUE

FALSE

39) Management would accept a project when IRR is lessthan the RRR.

TRUE

FALSE

40) The process of restating future cash flows intoday's dollars is known as:

A) Compounding

B) Capitalizing

C) Annualizing

D) Discounting

Use the information below to answerQuestion#41:

GIVEN: Project C requires $300,000 net initialinvestment for new machinery with a 7-year life

and a Salvage Value of $20,000. The company usesstraight-line depreciation. Project C is

expected to yield an annual Net Income of $60,000 peryear.

41) What is the Payback Period using the aboveinformation?

A) 2.8 years

B) 3.0 years

C) 4.0 years

D) 5.0 years

42)

Choose from one of the following that accurately depictsthis decision:

A) This investment should not be considered because NPVis a negative $44,298

B) This investment should be considered because NPVequals positive $44,298

C) This investment should be considered because the IRRfor this investment is obviously

less than its Required Rate of Return

D) This investment should be considered because RRR isobviously greater than the IRR

for this investment

E) Both B and C are correct

Answer rating: 100% (QA)

ANSWER38 We know that internal rate of return IRR s the interest rate where present cash inflows are ... View the full answer