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      Question

      Which of the following statement is not true:

      A Sensitivity analysis involves identification of crucial variable relating to costs and returns, specification of alternative values of the crucial variables and re-computation of the NPV and IRR by using the alternative values. Correct Answer Incorrect Answer
      B The risk analysis adds valuable information to the project analysis and it is an important tool in this respect but to take up investment or not depends on the risk-taking capacity of the entrepreneur. Correct Answer Incorrect Answer
      C IRR represents the returns internally generated by the project. This is also the rate which makes the net present value equal to 1. Correct Answer Incorrect Answer
      D The project is considered viable if the IRR is more than the acceptable rate for the entrepreneur which could be the opportunity cost for his funds. Correct Answer Incorrect Answer
      E All are correct Correct Answer Incorrect Answer

      Solution

      IRR represents the returns internally generated by the project. This is also the rate which makes the net present value equal to 0. The calculation of IRR is a process of trial and error.

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