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CA Inter Internal Rate of Return — practice questions — page 2

Explore 52 free Internal Rate of Return questions in CA Inter Financial Management. Open each question or exercise to read its content, reference answers and available explanation.

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Internal Rate of Return questions and exercises with answers

Showing questions 31–52 of 52.

Strip mines and nuclear plants often have multiple IRRs because of:Read the answer and worked solution →If all cash flows are outflows, the NPV is:Read the answer and worked solution →A unique IRR exists when years of net investment are followed by:Read the answer and worked solution →IRR is often said to assume interim cash is reinvested at:Read the answer and worked solution →In MIRR, the assumed reinvestment rate is usually the project's:Read the answer and worked solution →MIRR avoids which IRR ambiguity?Read the answer and worked solution →MIRR is used in capital budgeting to rank investments of:Read the answer and worked solution →Outlay Rs 1,000; inflows Rs 1,100 and Rs 230 in years 1 and 2; reinvest at 10%. MIRR?Read the answer and worked solution →In the MIRR formula, n stands for the number of:Read the answer and worked solution →Project X has a lower IRR but a higher NPV than mutually exclusive Y, no capital limit. Choose:Read the answer and worked solution →IRR should not be used alone to compare projects of different:Read the answer and worked solution →Comparing one project's IRR with the required rate, in isolation, is equivalent to:Read the answer and worked solution →A lower IRR is preferable for a loan because it means:Read the answer and worked solution →To maximize return, projects are ranked in order of:Read the answer and worked solution →The equivalent annuity method is often used to compare projects of:Read the answer and worked solution →The equivalent annuity method divides the NPV by what to annualize it?Read the answer and worked solution →Mutually exclusive projects are those from which:Read the answer and worked solution →With no capital constraint, which projects does a firm accept to maximize value?Read the answer and worked solution →In personal finance the IRR measures what type of performance?Read the answer and worked solution →The AIRR approach of Magni was introduced to solve problems of:Read the answer and worked solution →If cash flows are random variables, as in a life annuity, IRR uses their:Read the answer and worked solution →The same return received later gives an IRR that is:Read the answer and worked solution →

Worked practice questions

Strip mines and nuclear plants often have multiple IRRs because of:

  1. very low initial cost
  2. constant annual inflows
  3. an absence of any outflow
  4. a large outflow at project end
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Correct answer: D. a large outflow at project end

A big closing cost after earlier inflows adds a second sign change, which allows several IRRs.

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If all cash flows are outflows, the NPV is:

  1. Positive only below IRR
  2. Zero at every rate
  3. Negative at every rate
  4. Positive at every rate
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Correct answer: C. Negative at every rate

Discounting a stream of only negative amounts can never produce zero, so no IRR exists.

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A unique IRR exists when years of net investment are followed by:

  1. a closing decommissioning cost
  2. alternating gains and losses
  3. more years of net investment
  4. several years of net revenues
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Correct answer: D. several years of net revenues

With outflows first and inflows afterwards there is one sign change, which guarantees a single IRR.

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