Without using formulas, provide a deﬁnition of internal rate of return (IRR).
A) The rate of return provided by a project. The value is compared with a company's rate of return to determine viability of a project.
B) A situation whereby a choice has to be made between two or more projects, and choosing multiple projects is not an option.
C) A graphical representation of the relationship between varying rates of return and the corresponding NPV value.
D) A project analysis tool that measures the acceptability of a project through the difference between a project's initial investment and whether the present value of its cash ﬂow will
Repay the investment.
E) A project analysis tool that measures the acceptability of a project by determining the amount of proﬁt that can be expected based on an investment made.

Question

Quizplus · Accepted Answer

The definition of IRR is that it is the rate of return provided by a project, which is compared to a company's rate of return to determine the viability of a project. This definition best describes what IRR is without using formulas. Options B, C, D, and E are not accurate definitions of IRR.

Without Using Formulas, Provide a Deﬁnition of Internal Rate of Return