1. Describe_______________________________________________

___________________________________________________________.

2. Performing a post-audit is important for several reasons.

a.

b.

c.

3. A post-audit involves ______________________________________

___________________________________________________________.

G. Internal Rate of Return (IRR).

1. The internal rate of return method differs from the net present value method in that it finds the interest yield of the potential investment.

a. The internal rate of return is the interest rate that will cause ______

_________________________________________________________

b. The determination of the internal rate of return involves the use of a financial calculator or computerized spreadsheet to solve for the rate (if the cash flows are uneven).

c. If the net annual cash flows are equal, an easier approach to solving for the internal rate of return can be used. This approach involves two steps:

(1)

(2)

d. Internal Rate of Return Factor =

e. Once managers know the internal rate, of return, they compare it to

________________________________________________________

f. The IRR decision rule is: ________________________________ ________________________________________________________.

2. The two discounted cash flow methods differ as follows:

a. Objective:

(1)

(2)

b. Decision rule:

(1)

(2)

H. Annual Rate of Return Method.

1. The annual rate of return method is based directly on accounting data rather than on cash flows.

a.

b.

c.

d.

e.

f.

g.