A discount rate which is equal to the present value of TV to the project cost present value is classified as _________?
Correct answer: B. modified internal rate of return
- A. negative internal rate of return
- B. modified internal rate of return
- C. existed internal rate of return
- D. relative rate of return
Explanation
Modified internal rate of return is the discount rate that equates the present value of the terminal value of project cash flows with the present value of the investment cost. This adjusts ordinary IRR by assuming more realistic reinvestment and financing rates.
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About Business Finance
Business finance explains how organisations plan, obtain and use money while balancing risk, return and liquidity. Topics include financial statements, time value of money, budgeting, working capital, capital structure, sources of finance, investment appraisal and cost of capital. Capital budgeting evaluates long-term projects, whereas working capital manages day-to-day operations.
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