The internal rate of return is defined as the:
A)maximum rate of return a firm expects to earn on a project.
B)rate of return a project will generate if the project in financed solely with internal funds.
C)discount rate that equates the net cash inflows of a project to zero.
D)discount rate which causes the net present value of a project to equal zero.
E)discount rate that causes the profitability index for a project to equal zero.

Question

Quizplus · Accepted Answer

The internal rate of return (IRR) is the discount rate that equates the present value of the expected cash inflows to the initial investment or the net present value (NPV) of the project to zero. In other words, it is the rate at which the project's cash inflows and outflows are equal. Therefore, option D is the correct answer.

The Internal Rate of Return Is Defined as The