1. Identify the steps required in using the internal rate of return method when the net annual cash flows are equal.
2. El Cajon Company uses the internal rate of return method. What is the decision rule for this method?
3. What are the strengths of the annual rate of return approach? What are its weaknesses?
4. Your classmate, Mike Dawson, is confused about the factors that are included in the annual rate of return technique. What is the formula for this technique?
5. Sveta Pace is trying to understand the term "cost of capital." Define the term and indicate its relevance to the decision rule under the internal rate of return technique.