Which of the following statements about the internal rate of return method is false?
A)The internal rate of return is equal to the required rate of return when the net present value is equal to zero.
B)The internal rate of return is greater than the required rate of return when the net present value is negative.
C)The internal rate of return represents the expected rate of return on a project.
D)The internal rate of return is the discount rate that forces the present value of a project's inflows to equal its outflows.

Question

Quizplus · Accepted Answer

This statement is false because the internal rate of return is actually less than the required rate of return when the net present value is negative. The IRR represents the discount rate that makes the net present value zero, not the expected rate of return on a project. Statement A is true, and statement D is a correct definition of IRR.

Which of the Following Statements About the Internal Rate of Return