In capital budgeting, an internal rate of return of project is classified as its__________?
Correct answer: B. Internal rate of return
- A. External rate of return
- B. Internal rate of return
- C. Positive rate of return
- D. Negative rate of return
Explanation
The internal rate of return is the discount rate that makes a project’s net present value equal to zero, so it is itself called the project’s internal rate of return. The other choices are not the standard definition.
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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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