43.1
1.Circle any/all that are true. (3)

The internal rate of return:

1. is the best tool we have for deciding in which projects to invest.
2. is just as good as NPV for deciding in which projects to invest, but no better.
3. is the discount rate at which the NPV of the project is zero.
4. is compared to the hurdle rate: the IRR rule says to accept the project if the IRR is greater than the hurdle rate.
5. will give you the same investment decision as NPV if the initial cash flow is negative followed by all positive cash flows, and the investment decision does not affect the decision to accept or reject another investment.

Answers c and e are correct. See the topic on alternatives to NPV. d is not right because when then project looks like borrowing instead of lending, the IRR rule is the opposite of what is stated.

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