The internal rate of return (IRR) is often preferred by managers over the net present value (NPV) because the IRR:
A) Is more reliable given unconventional cash ﬂows.
B) Is the discount rate that maximizes net proﬁts.
C) Is contingent upon the current market rates of return.
D) Reveals the discount rate that maximizes the net present value.
E) Is expressed as a rate while the NPV is expressed in dollar terms.

Question

Quizplus · Accepted Answer

Managers often prefer IRR because it is expressed as a percentage rate, making it easier to compare with required rates of return or other investment opportunities, unlike NPV which is expressed in dollar terms.

The Internal Rate of Return (IRR) Is Often Preferred by Managers