In return for promising to make future payments, a firm receives cash or other assets with a measurable cash-equivalent value.The firm records a long-term liability for that amount and determines the market interest rate by finding the
A)internal rate of return.
B)external rate of return.
C)applicable federal rate.
D)prime lending rate published in The Wall Street Journal.
E)federal funds rate.

Question

Quizplus · Accepted Answer

The internal rate of return (IRR) is used to determine the market interest rate for a firm's long-term liabilities when it promises to make future payments in exchange for receiving cash or other assets. The IRR is the discount rate that makes the net present value (NPV) of all cash flows from a particular project equal to zero, and it's used to assess the profitability of potential investments.

In Return for Promising to Make Future Payments, a Firm