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

Question

Quizplus · Accepted Answer

When using internal rate of return (IRR) to evaluate investment alternatives, the analyst specifies a cut-off rate, which is also known as the hurdle rate or required rate of return. The IRR is then compared to the cut-off rate to determine if the investment is acceptable. The other options listed (applicable federal rate, risk-free rate, prime rate) are not typically used in determining IRR.

When Using the Internal Rate of Return to Evaluate Investment