Module 5 - IRR, Sensitivity, B/C

Question 1

What is the rate of return?

Answer 1

The break-even discount rate where the present worth of the project is $0

Question 2

What is the rule for the number of i* values?

Answer 2

It’s never greater than the number of sign changes in the sequence

Question 3

What are the methods for determining the rate of return?

Answer 3

Direct solution, trial and error, computer solution

Question 4

What is the rate of return if you invest $2000 and receive $3500 in 4 years

Answer 4

15.02%

Question 5

What’s is the acceptance criteria for rate of return?

Answer 5

If IRR >= MARR

Question 6

What are some methods to evaluate project risk?

Answer 6

Sensitivity Analysis, Scenario Analysis, Break-Even analysis

Question 7

What is sensitivity analysis?

Answer 7

Identifying project variables which have the greatest effect on project acceptability

Question 8

What is break-even analysis?

Answer 8

Identify value of a project variable which causes the project to break even

Question 9

What is scenario analysis?

Answer 9

Comparing a base case to the best and worst case scenario to identify extremes

Question 10

How are B/C ratios compared?

Answer 10

Incremental analysis