The IRR that causes the net present value of the differences between two project's cash flows to equal zero is called the:

Question

BlackTom AI · Accepted Answer

The question asks about a specific IRR concept: the rate at which the net present value (NPV) of the differences between two project's cash flows equals zero.
Option 1: 'required return.' This is the minimum return investors expect on an investment, not the rate that zeros the NPV of differences between two projects. It is a benchmark, not the crossover point.
Option 2: 'zero-sum rate.' This phrasing is not standard in capital budgeting or IRR terminology. It does not describe the rate where NPV differences vanish.
Option 3: 'present value rate.' While IRR involves discounting cash flows to present value, this term is not a recognized label for the rate that equates the NPV of differences to zero between two projects.
Option 4: 'break-even rate.' Although intuitively similar, this term is not the conventional name for the rate at which the NPV of the differences between two projects is zero; it misleads by implying a simple break-even on cash flows rather than the crossover concept.
Option 5: 'crossover rate.' This is the standard term in capital budgeting for the discount rate at which the NPVs of two projects are equal, i.e., the NPV of the differences between their cash flows equals zero. It marks the point where one project becomes preferable to the other depending on the discount rate.
In summary, among the given choices, the only option that correctly names the rate where the NPVs of the two projects cross (NPV differences equal zero) is the crossover rate.

The IRR that causes the net present value of the differences between two project's cash flows to equal zero is called the:单项选择题

类似问题

You are evaluating two projects with the following cash flows: Year Project X Project Y 0 −$ 541,200 −$ 511,500 1 219,600 209,300 2 229,500 219,100 3 236,700 227,000 4 196,400 187,800 What is the crossover rate for these two projects?

Matterhorn Mountain Gear is evaluating two projects with the following cash flows: Year Project X Project Y 0 −$ 317,400 −$ 295,550 1 147,100 137,800 2 164,600 155,000 3 129,700 120,750 What interest rate will make the NPV for the projects equal?

Part 7 of 8: You also learned that the crossover rate is unique. The crossover rate is approximately 11.07%. At that point, both NPVA and NPVB are still positive ( $43,705 approx.) From this information, you can conclude that the IRR of Project A will be lower than the IRR of Project B.

更多留学生实用工具

智能学习助手

风格化写作助手

论文查重助手

文献引用助手

课堂转译助手

课堂笔记助手

Quiz搜索助手

学校历年真题

智能刷题助手

智能匹配练习

希望你的学习变得更简单