The internal rate of return may be defined as:
A)the discount rate that makes the NPV equal to zero.
B)the difference between the market rate of interest and the NPV.
C)the market rate of interest less the risk-free rate.
D)the project acceptance rate set by management.
E)None of the above.

Question

Quizplus · Accepted Answer

The internal rate of return (IRR) is the discount rate that makes the net present value (NPV) of an investment equal to zero. It is the rate at which the investment's cash inflows and outflows are equal. Therefore, choice A is the correct definition of IRR. B, C, and D do not accurately define IRR.

The Internal Rate of Return May Be Defined As