Generally, the ____ is considered to be a more realistic reinvestment rate than the ____. a. risk-free rate; cost of capital b. risk-free rate; internal rate of return c. cost of capital; internal rate of return d. internal rate of return; cost of capital

Generally, the is considered to be a more realistic reinvestment rate than the . a. risk-free rate; cost of capital b. risk-free rate; internal rate of return c. cost of capital; internal rate of return d. internal rate of return; cost of capital

Principles of Accounting Volume 2

19th Edition

ISBN:9781947172609

Author:OpenStax

Publisher:OpenStax

Chapter11: Capital Budgeting Decisions

Section: Chapter Questions

Problem 3MC: The third step for making a capital investment decision is to establish baseline criteria for...

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Concept explainers

Interest Rate

When you deposit your money with the bank, the deposit earns you some extra money at the end of the specific period – something more than what you deposited. That amount of money that the bank pays you for keeping the money with the bank is the “interest” and the percentage at which the bank pays you for your amount is called the “interest rate”.

Question

Generally, the ____ is considered to be a more realistic reinvestment rate than the ____.

	a.	risk-free rate; cost of capital
	b.	risk-free rate; internal rate of return
	c.	cost of capital; internal rate of return
	d.	internal rate of return; cost of capital

Definition Definition Discount rate of a project wherein its net present value equals zero. Internal rate of return equates the present value of future cash flows with the initial investments. Internal rate of return helps to determine nominal cash flows.

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