The internal rate of return of an investment project is the:

Question

Quizplus · Accepted Answer

The internal rate of return (IRR) is the discount rate that makes the net present value (NPV) of an investment equal to zero. In other words, it is the rate of return at which the present value of the future cash inflows equals the present value of the initial investment. Therefore, option A is the correct answer. Option B refers to the required rate of return or hurdle rate, which may or may not be the same as the IRR. Option C refers to the weighted average cost of capital (WACC), which is the average cost of all the capital raised by a company, including debt and equity. This is not necessarily equal to the IRR of a specific investment project. Option D is also unlikely to be the correct answer since the company's cost of capital may again not be the same as the IRR of a specific investment project.

The Internal Rate of Return of an Investment Project Is