Which of the following statement is true?
A)One must know the discount rate to compute the NPV of a project but one can compute the IRR without referring to the discount rate.
B)One must know the discount rate to compute the IRR of a project but one can compute the NPV without referring to the discount rate.
C)Payback accounts for time value of money.
D)There will always be one IRR regardless of cash flows.
E)Return on equity is the ratio of total assets to total net income.

Question

Quizplus · Accepted Answer

To compute the NPV (Net Present Value), the discount rate is necessary as it is used to discount future cash flows to their present value. However, the IRR (Internal Rate of Return) is the rate at which the NPV equals zero, and it can be computed without knowing the discount rate.

Which of the Following Statement Is True