which of the following do you need to know to calculate the IRR of a project?. 1. project's estimated cash flows 2. project's level of risk 3. project's required rate of return 4. project's NPV a. 1 and 2 b. 4 only c. 1,2 and 3 d. 1 only e. 2 only

which of the following do you need to know to calculate the IRR of a project?. 1. project's estimated cash flows 2. project's level of risk 3. project's required rate of return 4. project's NPV a. 1 and 2 b. 4 only c. 1,2 and 3 d. 1 only e. 2 only

EBK CONTEMPORARY FINANCIAL MANAGEMENT

14th Edition

ISBN:9781337514835

Author:MOYER

Publisher:MOYER

Chapter11: Capital Budgeting And Risk

Section: Chapter Questions

Problem 3QTD

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Concept explainers

Production Budget

A budget can be defined as a financial plan designed by an undertaking for a definite period in the future that can contribute towards enhancing the financial success of the business undertaking. It is used to estimate the revenue and expenses. The budget generally takes into account both current and future income and expenses.

Question

which of the following do you need to know to calculate the IRR of a project?.

1. project's estimated cash flows

2. project's level of risk

3. project's required rate of return

4. project's NPV

a. 1 and 2

b. 4 only

c. 1,2 and 3

d. 1 only

e. 2 only

Definition Definition Percentage gain or loss from a specific investment over time. The rate of return is the difference between the closing and initial values of an investment divided by the initial value of the investment. The closing value includes any intermediate cash flows such as dividends or interest amounts.

Expert Solution

Step 1

Companies use capital budgeting techniques to evaluate the projects. IRR is internal rate of return. It is one of capital budgeting techniques.

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