Utilizing a 6 percent interest rate, the NPV of an investment is calculated to be zero at the end of the term. The purchase price of the investment is $100,000. Which of the following is true?
A) The IRR is 0 percent.
B) The IRR is 6 percent.
C) The IRR is less than 6 percent.
D) The IRR is more than 6 percent.

Question

Quizplus · Accepted Answer

The Internal Rate of Return (IRR) is the interest rate at which the net present value (NPV) of all the cash flows (both positive and negative) from a project or investment equals zero. If the NPV is zero at a 6 percent interest rate, it means that the IRR of the investment is exactly 6 percent.

Utilizing a 6 Percent Interest Rate, the NPV of an Investment