Practice Internal Rate Of Return (irr) (25.5.B.2) - Capital Budgeting Techniques

Practice: Internal Rate of Return (IRR)

Lesson 25.5.B.2Capital Budgeting Techniques

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9 questions

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2 cards from this section. Quick, good the night before a test.
Exercise
6 questions · about 4 min · pass mark 70%. Hints available.
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Quiz
3 questions · about 2 min · pass mark 70%. Hints available.
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6 sample questions

Question 1.
What is IRR?
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What does NPV equal when IRR is used?
Question 2.
When should a project be accepted based on IRR?
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Think about the comparison with required rates.
3Question 3.
What does IRR stand for?
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What does IRR measure in relation to investments?
4Question 4.
If the IRR of a project is less than the required rate of return, what should be the decision?
- Accept
- Reject
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Reflect on the comparison rule for project acceptance.
Question 5.
A project requires an initial investment of $5,000 and generates cash inflows of $1,200 annually for 6 years. Calculate the IRR and assess if the project is favorable if the required rate of return is 8%.
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Use software to find the IRR accurately.
Question 6.
Consider two projects, A with cash flows of $1,000 per year for 5 years and an initial cost of $3,500, and B with cash flows of $1,500 per year but an initial cost of $5,000. Calculate their IRRs and suggest which project is preferable.
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Calculate NPV at different rates to determine IRR for both projects.

5 more questions in this section. Enroll free to practise them all.