Internal rate of return (IRR) method is also called:
A) Discounted payback period method
B) Discounted cash-flow (DCF) rate of return method
C) Modified internal rate of return (MIRR) method
D) None of the above

Question

Quizplus · Accepted Answer

The IRR method is also known as the discounted cash-flow rate of return method because it calculates the rate of return that makes the net present value of future cash flows equal to zero. Option A is incorrect because the discounted payback period method does not take into account the time value of money. Option C is incorrect because the modified internal rate of return method adjusts for the reinvestment of cash flows, while the IRR method assumes that cash flows are reinvested at the same rate as the initial investment. Option D is incorrect because there is an appropriate answer to the question.

Internal Rate of Return (IRR) Method Is Also Called