The discount rate that yields a net present value of zero for an investment is the:
A)Internal rate of return.
B)Accounting rate of return.
C)Net present value rate of return.
D)Zero rate of return.
E)Payback rate of return.

Question

Quizplus · Accepted Answer

The internal rate of return (IRR) is the discount rate that makes the net present value of an investment equal to zero. In other words, it is the rate of return at which the present value of the investment's cash inflows equals the present value of its cash outflows. Therefore, the correct answer is A) Internal rate of return.

The Discount Rate That Yields a Net Present Value of Zero