The internal rate of return is the correct discount rate to use when computing the net present value of an investment.

Question

Quizplus · Accepted Answer

The internal rate of return (IRR) is the discount rate that makes the net present value (NPV) of an investment zero, but it is not necessarily the correct discount rate to use for NPV calculations. The correct discount rate should reflect the opportunity cost of capital or the required rate of return for the investment.

The Internal Rate of Return Is the Correct Discount Rate