If the net present value of a project is zero based on a discount rate of 16%, then the internal rate of return is:
A) equal to 16%.
B) less than 16%.
C) greater than 16%.
D) cannot be determined from this data.

Question

Quizplus · Accepted Answer

The internal rate of return (IRR) is the discount rate at which the net present value (NPV) of a project is equal to zero. Since the NPV is already zero at a discount rate of 16%, the IRR must also be 16%. Therefore, the correct choice is (A) equal to 16%.

If the Net Present Value of a Project Is Zero