If the internal rate of return is used as the discount rate in computing net present value,the net present value will be:
A)positive.
B)negative.
C)zero.
D)unknown.

Question

Quizplus · Accepted Answer

If the internal rate of return (IRR) is used as the discount rate, the net present value (NPV) will be zero. This is because the IRR is the discount rate that makes the NPV of a project equal to zero. Therefore, if the IRR is used as the discount rate, the NPV will already be at zero. If the NPV is positive, it means that the actual rate of return is higher than the IRR, while a negative NPV means that the actual rate of return is lower than the IRR. So, the best choice is C, which is zero.

If the Internal Rate of Return Is Used as the Discount