Which of the following will cause the internal rate of return to increase?
A) An increase in the annual cash inflows
B) A decrease in the annual cash inflows
C) An increase in the discount rate
D) A decrease in the discount rate

Question

Quizplus · Accepted Answer

An increase in the annual cash inflows will cause the internal rate of return (IRR) to increase because the IRR is the discount rate that makes the net present value (NPV) of all cash flows from a particular project equal to zero. Higher cash inflows increase the project's profitability, thus increasing its IRR.

Which of the Following Will Cause the Internal Rate of Return