1. Which of the following is the correct definition of Internal Rate of Return (IRR)?
IRR is the rate at which the present value of all future cash flows equals initial outlay. IRR is the same as Average Accounting Rate of Return.
IRR is the rate at which the Net Present Value (NPV) equals present value of all future cash flows.
IRR is the rate of return required by project's investors.
IRR is the rate at which Net Present Value (NPV) equals initial outlay.
2. Which one of the following indicates that a project is expected to create value for its owners?
Profitability index less than zero
Positive IRR
Internal rate of return (IRR) that is less than the required rate of return
NPV that is greater than zero
Payback period greater than the cut-off period