The ________ is the discount rate that equates the present value of the cash inflows with the initial investment.

Question

Quizplus · Accepted Answer

The internal rate of return (IRR) is the discount rate that makes the net present value equal to zero. In other words, it is the rate at which the present value of cash inflows equals the initial investment. Therefore, option D is the correct answer. Option A, B, and C are incorrect as they do not directly address the discount rate that equates the present value of cash inflows with the initial investment. The payback period simply measures the time it takes to recoup the initial investment, the net present value calculates the present value of future cash inflows minus the initial investment, and the cost of capital is the rate of return required by investors.

The ________ Is the Discount Rate That Equates the Present