If the IRR is 10% APR for two projects, then ____.
A)the projects have equally risky cash flows
B)the projects have the same discount rate
C)the NPVs of the projects are the same
D)the expected cash flows of the projects may be the same despite having different values for variance

Question

Quizplus · Accepted Answer

The IRR (Internal Rate of Return) is a discount rate that makes the net present value (NPV) of all cash flows from a particular project equal to zero. It does not directly indicate the riskiness of the cash flows (A), nor does it imply that the projects have the same discount rate (B) or the same NPV (C). However, two projects can have the same IRR with different expected cash flows and variances, meaning their risk profiles and actual cash flows can vary while still achieving the same rate of return (D).

If the IRR Is 10% APR for Two Projects, Then