The internal rate of return on a project with an initial cost of $500 is 7.5 percent, so at a discount rate of 7.5 percent

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The internal rate of return (IRR) is the discount rate at which the net present value (NPV) of all the cash flows (both positive and negative) from a project or investment equals zero. Therefore, if the IRR is 7.5%, at a discount rate of 7.5%, the NPV will indeed be zero, indicating that the initial investment is exactly offset by the present value of the future net revenues, which also means the profitability index (the ratio of the present value of future cash flows to the initial investment) will be equal to one.

The Internal Rate of Return on a Project with an Initial