What is the difference between the discount rate used for net present value computations and the internal rate of return? Explain your answer
For net present value computations, a minimum required rate of return, or discount rate, is used as a screening tool to determine whether or not a capital investment decision meets a predetermined set of criteria. If the net present value of an investment is positive, then the capital investment generates an actual return greater than the discount rate and the project will be deemed as acceptable. The discount rate, however, is not the actual rate of return earned by the project.
The internal rate of return is the actual rate of return that a project earns.
You might also like to view...
There are many exceptions to the assumption that consumers in nations close to one another will have many common behaviors and traits
Indicate whether the statement is true or false
CAD, in the context of manufacturing flexibility, refers to?
a. Computer aided drafting b. Computer aided design c. Computer aided division d. Computer aided detailing
LNG Corporation and Midstates Utility Company enter a contract for a sale of liquefied natural gas. LNG draws a draft unconditionally ordering Midstates Utility to pay $50,000 to LNG's order in sixty days. Midstates Utility signs and dates the draft.? Refer to Fact Pattern 23-2. On this instrument, LNG is A) thebanker
B) thedrawer. C) themaker. D) the trader.
What reason did Jimmy Dunne III of Sandler O'Neill give for dedicating his time and resources to helping the families of his employees who were killed in the World Trade Center attacks?
a. There was a clause in their employment contract that required it. b. He wanted the attention his generosity would bring. c. His son will also be judged by how Jimmy Dunne responded to his employees' families' needs. d. None of the above