Which of the following statements related to the internal rate of return (IRR)are correct?
i.The IRR is the discount rate at which an investment's NPV equals zero.II.An investment should be undertaken if the discount rate exceeds the IRR.III.The IRR tends to be used more than net present value simply because its results are easier to comprehend.IV.The IRR is the best tool available for deciding between mutually exclusive investments.
A) I and II only
B) I and III only
C) II and III only
D) I,II,and IV only
E) I,II,III,and IV

Question

Quizplus · Accepted Answer

i. Correct, as the IRR is indeed the rate at which the net present value (NPV) of all the cash flows (both positive and negative) from a project or investment equals zero.iii. Correct, because the IRR provides a single percentage figure that estimates the yield of an investment, which can be easier for decision-makers to interpret compared to NPV, especially for those without a financial background. However, it's important to note that while IRR might be more commonly used due to its simplicity, this doesn't inherently make it a better tool than NPV in all situations.

Which of the Following Statements Related to the Internal Rate