The internal rate of return (IRR)method of evaluating investment projects equates the present value of cash inflows with the present value of cash outflows by discounting all of the cash flows at the firm's required rate of return.

Question

Quizplus · Accepted Answer

The IRR method finds the rate that equates the present value of cash inflows with the present value of cash outflows, not by using the firm's required rate of return, but by solving for the discount rate that makes the net present value (NPV) of the project equal to zero.

The Internal Rate of Return (IRR)method of Evaluating Investment Projects