Practice Internal Rate of Return (IRR) - 25.5.B.2 | 25. Capital Budgeting Techniques | Management 1 (Organizational Behaviour/Finance & Accounting)
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Practice Questions

Test your understanding with targeted questions related to the topic.

Question 1

Easy

What is IRR?

💡 Hint: What does NPV equal when IRR is used?

Question 2

Easy

When should a project be accepted based on IRR?

💡 Hint: Think about the comparison with required rates.

Practice 4 more questions and get performance evaluation

Interactive Quizzes

Engage in quick quizzes to reinforce what you've learned and check your comprehension.

Question 1

What does IRR stand for?

💡 Hint: What does IRR measure in relation to investments?

Question 2

If the IRR of a project is less than the required rate of return, what should be the decision?

  • Accept
  • Reject

💡 Hint: Reflect on the comparison rule for project acceptance.

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Challenge Problems

Push your limits with challenges.

Question 1

A project requires an initial investment of $5,000 and generates cash inflows of $1,200 annually for 6 years. Calculate the IRR and assess if the project is favorable if the required rate of return is 8%.

💡 Hint: Use software to find the IRR accurately.

Question 2

Consider two projects, A with cash flows of $1,000 per year for 5 years and an initial cost of $3,500, and B with cash flows of $1,500 per year but an initial cost of $5,000. Calculate their IRRs and suggest which project is preferable.

💡 Hint: Calculate NPV at different rates to determine IRR for both projects.

Challenge and get performance evaluation