Practice - Internal Rate of Return (IRR)
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Practice Questions
Test your understanding with targeted questions
What does IRR stand for?
💡 Hint: Think about what rate it refers to in financial terms.
What is the main purpose of calculating IRR?
💡 Hint: How does it help in decision-making?
4 more questions available
Interactive Quizzes
Quick quizzes to reinforce your learning
What is the IRR?
💡 Hint: Think about what IRR signifies in the evaluation of a project.
True or False: A project with IRR below the required return should be accepted.
💡 Hint: Consider the acceptance criteria related to IRR.
1 more question available
Challenge Problems
Push your limits with advanced challenges
You’re analyzing two projects: Project A has cash flows of ₹4000, ₹5000, and ₹6000 for three years with an initial investment of ₹10000; Project B has cash flows of ₹7000, ₹8000 for the first two years and ₹10000 in the third year with an investment of ₹15000. Find the IRR for both projects and determine which project to pursue based on IRR.
💡 Hint: Focus on determining NPV first, then find the discount rate.
Explain why IRR can sometimes lead to misleading results for projects with non-conventional cash flows.
💡 Hint: Think about what non-conventional cash flows imply for re-investment rates.
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