Which of the following statements about the internal rate of return (IRR) capital budgeting technique is correct?

Question

Quizplus · Accepted Answer

The internal rate of return (IRR) is the discount rate that equates the present value of a project's cash outflows (or costs) with the present value of its cash inflows. In other words, it is the rate of return an investment is expected to generate over its lifetime. The IRR is not necessarily the same as the firm's required rate of return and it may differ from the discount rate used to evaluate a project's net present value (NPV). The IRR can also indicate whether a project is financially feasible (positive IRR) or not (negative IRR). Additionally, the IRR does not necessarily correspond to the shortest payback period or the discount rate that should be used for projects with multiple cash outflows.

Which of the Following Statements About the Internal Rate of Return