The_________is the compound annual rate of return that the firm will earn if it invests in the project and receives the given cash inflows.
A) internal rate of return
B) discount rate
C) opportunity cost
D) cost of capital

Question

Quizplus · Accepted Answer

The compound annual rate of return that the firm earns on an investment over its life is called the internal rate of return (IRR). It is the discount rate that makes the net present value of all cash inflows and outflows from an investment equal to zero. Therefore, option A is the correct choice. Option B, C, and D are also related to investment decision-making, but they refer to different concepts. The discount rate is the rate used to calculate the present value of future cash flows, the opportunity cost is the cost of forgoing the next best alternative, and the cost of capital is the cost of funds borrowed or raised by the firm.

The_________is the Compound Annual Rate of Return That the Firm