Certified Internal Auditor (CIA) Part 3: Business Knowledge for Internal Auditing — Question 45

A new manager received computations of the internal rate of return regarding his project proposal. What should the manager compare the computation results to in order to determine whether the project is potentially acceptable?

Answer options

• A. Compare to the annual cost of capital.
• B. Compare to the annual interest rate.
• C. Compare to the required rate of return
• D. Compare to the net present value.

Correct answer: D

Explanation

The manager should compare the internal rate of return to the net present value to determine if the project is viable. The net present value provides insight into the profitability of the project, while the other options do not directly indicate project acceptability in this context.