The internal rate of return (IRR): I. rule states that a typical investment project with an IRR that is less than the required rate should be accepted.
II) is the rate generated solely by the cash flows of an investment.
III) is the rate that causes the net present value of a project to exactly equal zero.
IV) can effectively be used to analyze all investment scenarios.
A) I and IV only
B) II and III only
C) I, II, and III only
D) II, III, and IV only
E) I, II, III, and IV

Question

Quizplus · Accepted Answer

Option I is incorrect as an investment project should be rejected if its IRR is less than the required rate. 
Option II is correct as the IRR is calculated based on the cash flows of an investment. 
Option III is also correct as the IRR is the discount rate that results in a net present value of zero. 
Option IV is incorrect as the IRR does not consider the size of the investment or the timing of cash flows. Therefore, option B, II and III only, is the best choice.

The Internal Rate of Return (IRR): I