One of the advantages of InternalRate of Return is:a. Calculations are complex innatureb. It gives the closest rate ofreturnc. It ignores the reinvestmentpotentiald. None of these

The correct answer is b. It gives the closet rate of return.

Answered: One of the advantages of Internal Rate…

Business

Finance

One of the advantages of Internal Rate of Return is:

EBK CONTEMPORARY FINANCIAL MANAGEMENT

14th Edition

ISBN:9781337514835

Author:MOYER

Publisher:MOYER

Chapter10: Capital Budgeting: Decision Criteria And Real Option

Section: Chapter Questions

Problem 3QTD

See similar textbooks

Related questions

Q: Which are the Methods for Finding Rate of Return?

A: A Rate of Return (ROR) is the gain or loss of an investment over a certain period of time. When the…

Q: What happens if the payback period is within the acceptable range?

A: The payback period alludes to what extent it takes for a speculator to hit breakeven to recoup the…

Q: Determine which of the following two alternatives is the most efficient and which is the most…

A: Internal rate of return (IRR) of an alternative refers to the rate at which the Net present value…

Q: Define return rate

A: The return rate can be calculated on various assets and can be used to compare various investments.…

Q: What is the internal rate of return?

A: Internal rate of return is the discount rate at which present value of cash inflows equals outflows…

Q: Explain payback period

A: Answer: Payback period is nothing but the time a company gets back the money that is originally…

Q: Define each of the following terms: d. Modified internal rate of return (MIRR) method

A: Modified Internal Rate of Return (MIRR): The modified internal rate of return (MIRR) method…

Q: Explain how did it get the NPV, the Economic Value Added (EVA), and the Market Value Added (MVA)

A: Capital budgeting is a process that is undertaken by an organization or business to evaluate…

Q: What is meant by the term abnormal rate of return?

A: Abnormal rate of return is return earned above or below the normal rate of return.

Q: The internal rate of return for Company A is close to

A: IRR is a discount rate that makes the net present value (NPV) of all cash flows equal to zero in a…

Q: Identify and differentiate or define the types of

A: There are mainly two types of payback analysis : 1. Payback period 2. Discounted payback period

Q: Which alternative offers you the highest effective rate of return?

A: Investment appraisal is the method of evaluating and selecting investments from various investment…

Q: What is limitation of Payback period, Net Present Value (NPV) and Internal rate of return (IRR).…

A: i) Payback period: Payback period is the expected time period which is required to recover the cost…

Q: Internal rate of return

A: Internal rate of return- It is the rate of discount at which the sum of discounted cash inflows…

Q: What is meant by partitioning the internal rate of return? Why is this procedure meaningful?

A: Internal rate of return is defined as the annual rate of earnings on an investment and unlike income…

Q: How is it possible to achieve a higher rate of return without significantlyincreasing risk?

A: As we all learnes till now that higher the risk provides higher return and if we want the high…

Q: How can we calculate the Rate-of-Return with Excel?

A: The question is based on the concept of calculation of rate of return (ROR), (ROR) is percentage…

Q: The modified internal rate of return (MMIR) is the discount rate that forces the _____.

A: Explanation: Modified internal rate of return can be better understood from the below formula, where…

Q: Describe IRR on Incremental Investmentment When InitialFlows are equal?

A: The internal rate of return (IRR) is a capital budgeting metric used to gauge the benefit of…

Q: e Internal rate of return

A: The following problem can be solved using XIRR function in excel.

Q: Compare the mutually exclusive alternatives based on the rate of return?

A: Mutually exclusive projects are the projects out of which one best project is selected due to lack…

Q: What do we mean by internal rate of return (IRR)?

A: Internal rate of return : Internal rate of return is one of the techniques used in capital budgeting…

Q: What is a minimum attractive rate of return (MARR)?

A: Definition: Minimum Attractive Rate of Return (MARR): It is the minimum rate of return on the basis…

Q: Why is an incremental analysis necessary when conducting a rate of return analysis for cost…

A: Incremental analysis considers only the relevant cash flows and it does not consider the…

Q: What formula to use to find Payback Period and NPV? (in Excel)

A: NPV or Net Present Value is the present value of all net cash cashflow on a provided discount rate.…

Q: Explain different terms are used to refer to rate of return?

A: Answer: Rate of return is nothing but the returns that are expecting on investments made by…

Q: calculate the internal rate of return

A: Information Provided: Discount rate = 10% Realisable Value = 20%

Q: Explain real rate of return

A: This is the raw rate of return adjusted with inflation. It is used to ascertain the effective return…

Q: What is internal rate of return (IRR) method?

A: NPV shows the excess of PV of all the cash inflows over the initial outlay of the project. It is a…

Q: Define real rate of return.

A: Real Rate of Return is defined as the rate that has been adjusted for rise in prices of commodities.…

Q: Explain expected rate of return

A: Return: Return is defined as the money attained or lost on an investment through certain time…

Q: /hat is the exact rate of return?

A: MACHINE A PV FACTOR PRESENTVALUE A 0 FIRST COST -8000 8000…

Q: Does the Present Value (PV) technique is based on return?

A: One of the important decisions that are taken by the management is to make the investment decisions…

Q: What does it mean to be at the optimal capitalstructure? What is optimized? What is maximizedand…

A: Introduction: Capital structure is nothing but the debt and securities that are included in the…

Q: Explain realized rate of return

A: The return generated by an investment is any asset class is the normalized rate of return. When the…

Q: Define realized rate of return

A: Return can be defined as the profit or interest earned by the investor on the investment, which…

Q: The size of the investment required in Y is $ The rate of return on Y is | %.

A: Rate of Return: It is the return over a period of time made on the investment. Information…

Q: Explain the process of Rate-of-Return Calculation with Excel?

A: Rate of return is the rate expressed in terms of percentage which an investor expects from the…

Q: The minimum acceptable rate of return for an investment decision is called the;

A: A project to become acceptable shall be as such the costs shall be recovered completely.

Q: have led to a drop in the required rate of return?

A: Required Rate of return is the minimum rate of return which an investor expects for investing in a…

Q: Describe the advantages of using CAPM model to determine the expected return.

A: The question is related to Capital Asset Pricing Model.

Q: Explain an example how to calculate internal rate of return.

A: IRR is the return actually earned by the investor and discount rate is the return which the investor…

Q: Another term for return is ..................

A: Return means money which is earned or lost in the process of investment. Return can be in the form…

Question

One of the advantages of Internal
Rate of Return is:
a. Calculations are complex in
nature
b. It gives the closest rate of
return
c. It ignores the reinvestment
potential
d. None of these

Expert Solution

This question has been solved!

Explore an expertly crafted, step-by-step solution for a thorough understanding of key concepts.

SEE SOLUTION Check out a sample Q&A here

Step 1

VIEW

Step 2

VIEW

Step by step

Solved in 2 steps

SEE SOLUTION Check out a sample Q&A here

Knowledge Booster

Learn more about

Need a deep-dive on the concept behind this application? Look no further. Learn more about this topic, finance and related others by exploring similar questions and additional content below.

Similar questions

One of the advantages of Internal Rate of Return is: O a. It gives the closest rate of return O b. None of these c. Calculations are complex in nature O d. It ignores the reinvestment potential
Miller orr Model describes different levels such as____. a. Upper Limit b. Lower limit c. Return Point d. Upper Limit, Lower limit and Return Point
Hello This chapter is about security returns, and i dont understand what "Gamma, y" is in both of these equation. They are supposed to be First and Second-pass regression equation. What is Gamma used for and how does this have a relation with the CAPM formula
Determine which one has the best average rate of return. Do not give answer in image
What is MIRR - Modified Internal Rtae of Return? Please provide example.
What is the difference between YTD and YoY return? Provide an example
How does it compare with the NPV based on the WACC method? (Select the best choice below.) A. The NPV computed using the FTE method cannot be compared to the NPV based on the WACC method. B. The NPV computed using the FTE method is always higher than the NPV based on the WACC method. C. The NPV computed using the FTE method is always lower than the NPV based on the WACC method. D. The NPV computed using the FTE method is the same as the NPV based on the WACC method.
Expected return is best described as ________________________________ and is based on the single word ___?
d) Use a numerical example to illustrate that when there is a large change in the interest rate, the approximation error by using the duration and convexity rule is smaller than the approximation error by using the duration rule only.
If the rates of return of two assets tends to move in the same direction, they have a negative covariance and vice-versa? (4) a.false b. true
Which of the following statement is true of a covariance matrix? a. The diagonal values are volatilities b. The non-diagonal values are covariances c. The non-diagonal values are coefficients of variations d. none of the above
When npv is negative, the discount rate is greater than the actual return on investment. A. True B. False