Multiple choice

Directions: Choose the correct option for the given question: Internal rate of return determines the maximum rate of interest that a firm can afford to pay on the borrowings.

  1. True

  2. False
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A Correct answer
Explanation

The Internal Rate of Return (IRR) represents the break-even interest rate. If a firm borrows at a rate lower than the IRR, the project is profitable; thus, it defines the maximum affordable cost of capital.

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