When using the internal rate of return to evaluate investment alternatives,which rate would analysts specify?

Question

Quizplus · Accepted Answer

Analysts would specify the hurdle rate when using the internal rate of return to evaluate investment alternatives. The hurdle rate is the minimum rate of return required by the company or investor, and it represents the opportunity cost of investing in a specific project. Therefore, the internal rate of return should be compared to the hurdle rate to determine if the project is worth pursuing. The other options, such as the Federal funds rate, prime interest rate, and time-adjusted rate, are not relevant to the IRR analysis.

When Using the Internal Rate of Return to Evaluate Investment