Which of the following statements related to the internal rate of return (IRR)are correct?
I.The IRR is the discount rate at which an investment's NPV equals zero.
II.An investment should be undertaken if the discount rate exceeds the IRR.
III.The IRR tends to be used more than net present value simply because its results are easier to comprehend.
IV.The IRR is the best tool available for deciding between mutually exclusive investments.
A) I and II only
B) I and III only
C) II and III only
D) I, II, and IV only
E) I, II, III, and IV
F) None of the above.

Question

Quizplus · Accepted Answer

Statement I is correct as IRR is the discount rate that makes the NPV of an investment zero. Statement III is also correct as IRR is often preferred for its intuitive appeal, despite not always being the best decision tool. Statements II and IV are incorrect; an investment is typically undertaken if the IRR exceeds the discount rate, and IRR is not always the best tool for mutually exclusive investments.

Which of the Following Statements Related to the Internal Rate