20) The Internal Rate of Return is best described as:(1 Point) The point where t
ID: 2805092 • Letter: 2
Question
20) The Internal Rate of Return is best described as:(1 Point) The point where the initial investment is recovered The reciprocal of the payback periocd Thereciprocalofthe discounted payback period. The rate that, when used, results in a NPV being equal to zero. c 21) A project with a 10% cost of capital has a net present value of-$118. (2 Points) The IRR for this project will be: Lower than 10% Higher than 10% Equal to 10% Cannot be determined based on the info given above ! 22) Lambda Corporation is considering Project Alpha which is more risky than the firm's normal operations. The firm uses a 14% cost of capital to evaluate projects that have the same risk as its normal business activates. (2 Points) What cost of capital should be used to evaluate Project Alpha? 14% Lower than 14% Higher than 14% Cannot be determined based on the info aboveExplanation / Answer
20)
Internal rate of return is the return earned by the cash flows of the project. It is the break even rate for the investor. If the required rate is more than IRR, project should be rejected. At this rate NPV will be ZERO.
Hence, correct option is (D).
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