The internal rate of return:
A) may produce multiple rates of return when cash flows are conventional.
B) is best used when comparing mutually exclusive projects.
C) is rarely used in the business world today.
D) is principally used to evaluate small dollar projects.
E) is easy to understand.

Question

The internal rate of return: 
A) may produce multiple rates of return when cash flows are conventional. 
B) is best used when comparing mutually exclusive projects. 
C) is rarely used in the business world today. 
D) is principally used to evaluate small dollar projects. 
E) is easy to understand.

Quizplus · Accepted Answer

The internal rate of return (IRR) is easy to understand because it represents the discount rate at which the net present value of a project's cash flows equals zero, making it intuitive for decision-makers.

The Internal Rate of Return