Which of the following best describes the internal rate of return?
A) interest rate that makes the net present value of the investment equal to zero
B) discount rate that is used to evaluate funds borrowed from a lender for profitability
C) the ratio of average annual income to average amount invested
D) the rate at which the profitability of an investment increases

Question

Quizplus · Accepted Answer

The internal rate of return (IRR) is the interest rate that makes the net present value (NPV) of the investment equal to zero. In other words, it is the rate at which the cash inflows from the investment are equal to the cash outflows (the initial investment plus any subsequent investments or withdrawals). A higher IRR represents a more profitable investment.

Which of the Following Best Describes the Internal Rate of Return