The net present value of an investment is computed by discounting cash flows at the internal rate of return.

Question

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The net present value of an investment is computed by discounting cash flows at the required rate of return, which is usually the cost of capital. The internal rate of return is a related but different concept, as it represents the discount rate that makes the present value of cash inflows equal to the initial investment.

The Net Present Value of an Investment Is Computed by Discounting