Which one of the following statements is correct? IRR is the discount rate which, when applied to the expected cash flows from a project:

Question

Quizplus · Accepted Answer

The IRR is the discount rate that makes the net present value of the expected cash flows from the project equal to zero. Therefore, option B is the correct statement. Option A is incorrect because IRR does not prove whether a project is worth undertaking or not; it only provides a measure of the project's profitability. Option C is incorrect because the IRR may produce a positive or a negative net present value depending on the initial investment and the expected cash flows. Option D is incorrect because the IRR does not prove that the discount rate is appropriate to the business; it only provides a measure of the project's profitability.

Which One of the Following Statements Is Correct? IRR Is