Question 1: The internal rate of return is:
- the discount rate that makes the NPV positive.
- the discount rate that equates the present value of the cash inflows with the present value of the cash outflows.
- the discount rate that makes NPV negative.
- the rate of return that makes the NPV positive.
Question 2: One disadvantage of the NPV method is that:
- the NPV deals with cash flows.
- the NPV gives equal regard to all returns within a project's life.
- the NPV will always give the same project accept/reject decision as the IRR.
- the NPV requires long, detailed cash flow forecasts.