Explanation

IRR is most useful for comparing projects with the same initial investment, different lifespans, and different cash flows.

It helps evaluate the relative profitability of projects with varying characteristics, providing a comprehensive comparison.

Explanation

Compound interest formula: Interest on principal + accrued interest, resulting in exponential growth.

Compound interest is calculated on the initial principal and the interest that has been added to it.

Explanation

NPV considers project duration through cash flows.

It discounting each cash flow to its present value based on its timing.

It taking into account the project's length and cash flow timing.

Explanation

In NPV calculation, "discounting" means reducing future cash flows to their present value by applying a discount rate.

It converting them to today's dollars to evaluate a project's worth more accurately.

Explanation

Extending the project life can increase NPV, but it depends on the cash flow patterns.

If the extended period generates more cash inflows than outflows, NPV increases.

Explanation

In IRR, 'internal' means the project's internal cash flows equal the initial investment.

It measuring internal profitability.

It excluding external factors like market returns.

Explanation

If cash inflows are delayed, IRR Decreases.

Delayed cash inflows reduce the present value of the returns, leading to a lower IRR.

It indicates a less attractive investment opportunity.

Explanation

A company can reduce its COGS by reducing direct material costs.

Such as negotiating better prices with suppliers, improving manufacturing efficiency, or finding alternative materials.

Explanation

Direct labor is a component of COGS.

As it represents the cost of labor directly involved in the production of a company's products or services.

COGS typically includes:

• Direct materials (raw materials, components)
• Direct labor
• Overhead costs (manufacturing overhead, factory overhead)
• Distribution and shipping costs

Explanation

When interest is compounded more frequently, the effective annual rate (EAR) increases.

As the interest earns interest more often, resulting in a higher effective rate of return.

This means the investment grows faster over time.