# Internal rate of return

1.The internal rate of return on a project can be found

A.by discounting all cash flows at the cost of capital

B.by averaging all cash inflows, and calculating the interest rate which will make them equal to the average investment

C.by calculating the intersest rate whuch will equate the present value of all cash inflows to the present value of all cash outflows

D.None of the above

2.The NPV method is better than IRR because

A.the financial objective of the firm is the maximization of stockholder wealth, and the NPV measures the value of projects

B.The IRR does not consider the size of the project

C.The dollar figure produced by NPV method is preferred to the percentage results of the IRR method by a majority of managers

D.only a. and b.

E.none of the above

3.Which of the following is an example of a government action to internalize a cost externality?

A.The closing of a public library

B.A fine imposed on a company that pollutes a stream

C.A sales tax on jewelry

D.The increase on bridge tolls

4.Simulation analysis:

A.permits the calculations of expected value and standard deviation

B.does not permit the calculation of expected value and standard deviation

C.the calculation of the coefficient of variation

D.does not consider probabilities

5.A real option can present management with the opportunity to

A.vary output

B.abandon a project

C.postpone a project

D.all of the aboce

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