The method of evaluating long-term capital investments that finds the discount rate that makes the net present value of the future inflows from a project exactly equal to the amount invested is the
A) Payback method
B) Net present value method
C) Internal rate of return method
D) Accounting rate of return method

Question

Quizplus · Accepted Answer

The method described in the question is the definition of the Internal Rate of Return (IRR) method. It is a popular method for evaluating long-term investments as it takes into account the time value of money and considers all future cash flows. It is considered a more reliable method than the Payback and Accounting Rate of Return methods and is often used in conjunction with the Net Present Value method.

The Method of Evaluating Long-Term Capital Investments That Finds the Discount