The internal rate of return is defined as the interest rate that equates the cost of an investment (cash outflow) to the present value of the expected returns from the investment (cash inflow).

Question

Quizplus · Accepted Answer

The internal rate of return (IRR) is indeed the discount rate that makes the net present value (NPV) of all cash flows (both positive and negative) from a particular project or investment equal to zero. This means it equates the present value of the investment's cash inflows to its initial cost, effectively finding the rate of return at which the investment breaks even.

The Internal Rate of Return Is Defined as the Interest