When using the internal rate of return method to evaluate capital spending on a new project, the...
Question:
When using the internal rate of return method to evaluate capital spending on a new project, the project will be accepted if the internal rate of return is equal to or greater than:
A. the markup percentage on merchandise if the business is a merchandising business
B. management's required rate of return on the project
C. the rate of return on net sales
D. the gross margin percentage if the business is a merchandising business
Capital Investment:
Before the company takes capital investment, it is evaluated using different methods, like internal rate of return, payback period, net present value, and discounted payback period, to determine if it adds value to the organization.
Answer and Explanation: 1
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View this answerThe answer is option B.
In the internal rate of return (IRR) method, which is a rate that makes net present value zero, the company must take a...
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Internal Rate of Return Method: Definition & Calculation
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Chapter 14 / Lesson 7
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Discover what the internal rate of return is. Learn its importance and uses. Review its formula and learn how to calculate it through the given examples.
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