A point where the profile of net present value crosses the horizontal axis at the plotted graph indicates the project ___________?
Correct answer: C. internal rate of return
- A. costs
- B. cash flows
- C. internal rate of return
- D. external rate of return
Explanation
The NPV profile shows NPV against the discount rate, and the point where it crosses the horizontal axis has an NPV of zero. The discount rate producing zero NPV is the internal rate of return.
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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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