Which of the following defines internal rate of return (IRR)?

Question

Quizplus · Accepted Answer

Internal rate of return (IRR) is the interest rate that sets the present value of a project's cash inflows equal to the present value of a project's cost. It is a financial metric used to evaluate the potential profitability of an investment. The higher the IRR, the more desirable the investment is, as it indicates a higher return on investment. Therefore, option D is the correct choice which defines IRR. Option A is incorrect because it defines variable cost, not IRR. Option B is incorrect because it defines the maximum return achievable on investments, not IRR. Option C is also incorrect because it defines the net present value (NPV), not IRR.

Which of the Following Defines Internal Rate of Return (IRR)