# 112) The interest rate that makes the net present value of the investment equal to zero is the...

112) The interest rate that makes the net present value of the investment equal to zero is the internal rate of return.

113) The internal rate of return is used as the discount rate when calculating the net present value of a project.

114) The net present value method assumes that all cash inflows are immediately reinvested at a rate of return equal to the internal rate of return.

115) When evaluating capital investment projects, if the internal rate of return is less than the required rate of return, the project will be accepted.

116) When selecting a capital investment project from three alternatives, the project with the highest net present value will always be preferable.

117) The hurdle rate is the length of time it takes to recoup an investment&#39;s initial cost from the cash inflows that investment generates.

118) When evaluating the cash flows from an investment, a reduction in cash outflows is treated as the same as an increase in cash inflows.

119) When the profitability index is less than 1.00 for a project, that project has a positive net present value.

120) What is an attribute of the internal rate of return?

A) It is the interest rate that makes the NPV of the investment equal to zero.

B) It is the interest rate that makes the cost of the investment equal to the present value of the investment&#39;s net cash inflows.

C) It is used in the capital rationing process.

D) All of the above are attributes of the internal rate of return.

121) What would a project&#39;s profitability index be if the project has an internal rate of return which is equal to the company&#39;s discount rate?

A) It would be 0.5.

B) It would be 0.0.

C) It would be 1.0.

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