The interest rate yielded by a project is a rate that will cause the present value of the proposed capital expenditure to equal the present value of the expected annual cash inflows.

Question

Quizplus · Accepted Answer

The interest rate described is known as the internal rate of return (IRR), which is the discount rate that makes the net present value (NPV) of all cash flows from a particular project equal to zero. This means the present value of the expected cash inflows is equal to the initial investment.

The Interest Rate Yielded by a Project Is a Rate