Question

a simple rate of return in any one year may be less than or greater than the internal rate of return of a project.

True or false

Answer 1

Simple rate of return is determined by taking into consideration the net income and the amount invested in the project. Whereas internal rate of return is determined by taking into consideration the net annual cash inflows and the amount invested in the project.

Therefore, the simple rate of return will usually be different from the internal rate of return. It can be either greater than or less than the internal rate of return.

Thus, the given statement is true.