Question

what is the internal rate of return on an investment? what are
the acceptance criteria for IRR?

Answer #1

INTERNAL RATE OF RETURN IS RETURN WHICH MAKES PV OF ALL CASH INFLOWS EQUAL TO INITIAL INVESTMENT

THAT IS NPV = 0

NPV = 0 = PV OF ALL CASH INFLOWS - INITIAL INVESTMENT

OR

PV OF ALL CASH INFLOWS = INITIAL INVESTMENT

ACCEPTANCE CRITERIA

IF IRR > REQUIRED RATE OF RETURN, WE SHOULD ACCEPT THE PROJECT

WHEN WE CONSIDER MUTUALLY EXCLUSIVE PROEJCTS, SELECT THE PROJECT WITH HIGHER IRR

WHEN WE CONSIDER INDEPENDENT PROJECTS, SELECT ALL THE PROJECTS WHICH HAVE IRR > REQUIRED RATE OF RETURN

IRR FAILS WHEN WE HAVE NON-COVENTIONAL CASH FLOWS, THAT IS MORE THAN ONE CASH OUTFLOWS. BECAUSE IN THAT CASE, WE HAVE MORE THAN ONE IRR AND IT IS DIFFICULT TO DETERMINE WHICH ONE TO ACCEPT.

IRR ASSUMES THAT ALL CASH FLOWS ARE REINVESTED AT IRR RATE

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?

ALL OF THE BELOW ARE TRUE ABOUT INTERNAL RATE OF RETURN
EXCEPT
Select one:
a. ACCEPT THE PROJECT IF IRR IS LESS THAN THE DISCOUNT RATE
b. NPV EQUAL ZERO
c. ACCEPT THE PROJECT IF IRR IS HIGHER THAN THE DISCOUNT RATE
d. IRR IS A WAY TO EVALUATE THE ACCEPTANCE OF A PROJECT
Please Solve As soon as
Solve quickly I get you two UPVOTE directly
Thank's
Abdul-Rahim Taysir

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...

What is the Internal Rate of Return on an investment with the
following cash flows?
Year Cash Flow...
0 -$761,125
1 $330,500
2 $454,700
3 $161,200
Answers:
a. 12.93 percent
b. 9.42 percent
c. 11.88 percent
d. 14.71 percent
e. 10.96 percent

The net present value (NPV) and internal rate of return (IRR)
methods of investment analysis are interrelated and are sometimes
used together to make capital budgeting decisions.
Consider the case of Blue Hamster Manufacturing Inc.:
Last Tuesday, Blue Hamster Manufacturing Inc. lost a portion of
its planning and financial data when both its main and its backup
servers crashed. The company’s CFO remembers that the internal rate
of return (IRR) of Project Delta is 11.3%, but he can’t recall how...

The net present value (NPV) and internal rate of return (IRR)
methods of investment analysis are interrelated and are sometimes
used together to make capital budgeting decisions.
Consider the case of Blue Hamster Manufacturing Inc.:
Last Tuesday, Blue Hamster Manufacturing Inc. lost a portion of
its planning and financial data when both its main and its backup
servers crashed. The company’s CFO remembers that the internal rate
of return (IRR) of Project Delta is 11.3%, but he can’t recall how...

List and briefly discuss the advantages and disadvantages of the
internal rate of return (irr).

Can a project's Internal Rate of Return (IRR) be calculated
without knowing the discount rate? Explain.

Using Internal Rate of Return (IRR) for analysis can be flawed
because a. the discount rate can be overstated b. project cash
flows are expected to be reinvested at the internal rate of return
c. the project's cash flows can be back loaded d interest rates can
change over time for extended projects e it is generally easier to
understand a project's Net Present Value rather than its Internal
Rate of Return

Define Internal Rate of Return and explain what it measures.

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