Unlike the net present value criteria, the internal rate of return approach assumes an interest rateequal to
A) the project's opportunity cost.
B) the project's internal rate of return.
C) the relevant cost of capital.
D) the market's interest rate.

Question

Quizplus · Accepted Answer

The internal rate of return (IRR) approach assumes an interest rate equal to the project's internal rate of return. This is the rate at which the project's cash inflows equal its cash outflows, resulting in a net present value of zero. The IRR approach is useful in deciding whether to invest in a project or not, as it shows the rate of return that the project is expected to earn over its lifetime.

Unlike the Net Present Value Criteria, the Internal Rate of Return