The Internal Rate of Return is the discount rate that makes the Net Present Value:

Question

Quizplus · Accepted Answer

The Internal Rate of Return (IRR) is defined as the discount rate at which the Net Present Value (NPV) of cash flows from an investment is equal to zero. Therefore, the correct answer is A, which means that when the IRR is calculated, it should be used to discount the cash flows to see if the NPV is zero. If the NPV is positive, the project should be accepted, and if it is negative, the project should be rejected.

The Internal Rate of Return Is the Discount Rate That