Which of the following statements is true about internal rate of return?

Question

Quizplus · Accepted Answer

Internal rate of return (IRR) is the interest rate at which the net present value (NPV) of all the cash inflows and outflows associated with a project is equal to zero. In other words, it is the discount rate that makes the project's NPV equal to zero. Therefore, option D is the correct statement. Option A is incorrect as it confuses IRR with some other financial metric such as payback period. Option B is incorrect as it refers to the cost of capital or hurdle rate for accepting an investment. Option C is incorrect as it only describes the basic concept of NPV which is a separate financial metric from IRR.

Which of the Following Statements Is True About Internal Rate