The internal rate of return is
A) the discount rate that makes the NPV greater than zero.
B) the discount rate that makes the NPV equal to zero.
C) the discount rate that makes the NPV less than zero.
D) Both a and c are correct.

Question

Quizplus · Accepted Answer

The internal rate of return (IRR) is the discount rate at which the net present value (NPV) of the cash flows from a project equals zero. Therefore, option B is correct as it states that the IRR is the discount rate that makes the NPV equal to zero. Option A is incorrect because it states that the IRR makes the NPV greater than zero, while option C is incorrect because it states that the IRR makes the NPV less than zero. Option D is also incorrect because it includes both correct and incorrect statements.

The Internal Rate of Return Is