Question

The internal rate of return is defined as the:

A. maximum rate of return a firm expects to earn on a project.

B. discount rate which equates the net present value of cash inflows to the net present value of cash outflows to zero.

C. discount rate that causes the profitability index for a project to equal zero.

D. rate of return a project will generate if the project in financed solely with internal funds.

Which of the following are advantages of the payback method of project analysis? I. easy to use and understand II. considers the time value of money III. effectively handles investment risk IV. Uses income data rather than cash flow data

A. II, III, and IV only

B. I and III only

C. I and II only

D. II and III only

Which of the following is not a possible reason for conducting a post-audit review?

A. The post-audit review reduces the overall quality of future investment proposals.

B. The post-audit review helps identify those who consistently provide inaccurate estimates of cash flows.

C. The post-audit review allows the managers to stop unsuccessful projects, preventing excessive losses.

D. Managers who propose projects will be more careful before recommending a project.