CAF-7 · Chapter 9 · Question 15 of 15
Which of the following is considered a non-cash flow item that is explicitly ignored when calculating the Internal Rate of Return (IRR) of redeemable debt?
Test yourself: pick an answer
Reveal answer & explanation
Correct answer: D) The annual accounting depreciation of the company's assets
Explanation
IRR calculations are based strictly on actual cash flows. Accounting depreciation is a non-cash expense and has no place in the direct IRR calculation for the cost of debt.
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