Question

what is the difference between the internal rate of return (IRR) and the external rate of...

what is the difference between the internal rate of return (IRR) and the external rate of return (ERR)

Business   Economics   
0 0
Add a commentTranscribed image text
Next >

Homework Answers

Answer #1

ans...
the difference between are.
IRR
Internal Rate of Return (IRR) is a metric used in capital budgeting to estimate the profitability of potential investments. Internal rate of return is a discount rate that makes the net present value (NPV) of all cash flows from a particular project equal to zero. IRR calculations rely on the same formula as NPV does.
ERR
ERR method directly takes into account theinterest rate (
) external to a project at which netcash flows generated or required by the project overits life can be reinvested or borrowed.

If ERR=IRR, then the ERR method produces resultsidentical to those IRR method.

If ERR  MARR, the project is economically justified.

0 0
Know the answer?
Your Answer:

Post as a guest

Your Name:

What's your source?

Earn Coins

Coins can be redeemed for fabulous gifts.

Log In

Sign Up

Not the answer you're looking for?
Ask your own homework help question
Similar Questions
What is the difference between internal and external audits?
What is the difference between internal and external audits?
what are the difference between Internal and External Benchmarking ? please type all the difference that...
what are the difference between Internal and External Benchmarking ? please type all the difference that you know.
What is the difference between an internal check and an external check for a numerical solution?...
What is the difference between an internal check and an external check for a numerical solution? Give an example of an external check.
What is the internal rate of return (IRR) of a project, how is it calculated, and...
What is the internal rate of return (IRR) of a project, how is it calculated, and what is its decision rule?
Internal rate of return (IRR) The internal rate of return (IRR) refers to the compound annual...
Internal rate of return (IRR) The internal rate of return (IRR) refers to the compound annual rate of return that a project generates based on its up-front cost and subsequent cash flows. Consider this case: Falcon Freight is evaluating a proposed capital budgeting project (project Delta) that will require an initial investment of $1,500,000. Falcon Freight has been basing capital budgeting decisions on a project’s NPV; however, its new CFO wants to start using the IRR method for capital budgeting...
2. Internal rate of return (IRR) The internal rate of return (IRR) refers to the compound...
2. Internal rate of return (IRR) The internal rate of return (IRR) refers to the compound annual rate of return that a project generates based on its up-front cost and subsequent cash flows. Consider this case of Blue Llama Mining Company: Blue Llama Mining Company is evaluating a proposed capital budgeting project (project Delta) that will require an initial investment of $1,600,000. Blue Llama Mining Company has been basing capital budgeting decisions on a project’s NPV; however, its new CFO...
Which of the following statements is true about the internal rate of return (IRR)? a.If the...
Which of the following statements is true about the internal rate of return (IRR)? a.If the IRR is less than the required rate of return, the firm is indifferent between accepting or rejecting the investment proposal. b.If the IRR is greater than the required rate, the project is deemed acceptable. c.If the IRR is less than the required rate of return, the project is deemed acceptable. d.If the IRR is greater than the required rate of return, the firm is...
Describe the internal rate of return (IRR) as a method for deciding the desirability of a...
Describe the internal rate of return (IRR) as a method for deciding the desirability of a capital budgeting project. What is the acceptance benchmark when using IRR?
4. Internal rate of return (IRR) The internal rate of return (IRR) refers to the compound...
4. Internal rate of return (IRR) The internal rate of return (IRR) refers to the compound annual rate of return that a project generates based on its up-front cost and subsequent cash flows. Consider the case of Blue Llama Mining Company: Blue Llama Mining Company is evaluating a proposed capital budgeting project (project Sigma) that will require an initial investment of $800,000. The company has been basing capital budgeting decisions on a project’s NPV; however, its new CFO wants to...
Briefly explain the difference between Internal auditing and External auditing
Briefly explain the difference between Internal auditing and External auditing
ADVERTISEMENT
Need Online Homework Help?

Get Answers For Free
Most questions answered within 1 hours.

Ask a Question
ADVERTISEMENT