Which of the following is another name for the minimum desired rate of return? A

Question

Which of the following is another name for the minimum desired rate of return? A. Discount rate B. Required rate of return C. Hurdle rate D. All of the above 10. Which of the following capital budgeting methods is based on cash flows, profitability and the time value of money? A. Payback and accounting rate of return B. Payback and net present value C. Accounting rate of return and internal rate of return D. Net present value and intermal rate of retum 11. Which term below is best described as the "rate of return that makes the NPV ofa capital budgeting project equal to zero"? A. Accounting rate of return B. Discount rate C. Internal rate of return D. Net present value 12. The net present value method assumes that all cash inflows can be immediately reinvestedin new projects at the A. Cost of the corporation's common stock. B. Hurdle rate. C. Internal rate of return. D. Cost of the corporation's long-term debt.

Explanation / Answer

Answer 9

D - All of the above

Explanation : Minimum acceptable (desired ) rate of return (MARR ) is the minimimm rate of return on a project that an entity is willing to accept before starting a project . Discount rate , required rate of return , hurdle rate are all another names for minimum desired rate of return.

Answer 10

D. Net present value & Internal rate of return

Explanation : NPV & IRR are methods of capital budgeting to analyze profitability of the project on the basis of discounted cash flows using time value of money .

Answer 11

C. Internal rate of return

Explanation: IRR is the rate at which NPV of all cash flows ( both inflows & outflows) becomes "0".

Answer 12

B. Hurdle rate

Explanation : Under NPV method its an assumption that all cash flows that are generated by the project are immediately reinvested at discounting rate . Hurdle rate is another name for discount rate

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