Net present value (NPV) is usefully supplemented by internal rate of return (IRR), since IRR gives a good indication of the sensitivity of any decision made to changes in the discount rate.

Question

Quizplus · Accepted Answer

The statement is correct. NPV and IRR are often used together to evaluate investment opportunities. While NPV calculates the present value of future cash flows, IRR calculates the rate at which those cash flows will be generated, making it a useful tool to measure the sensitivity of an investment decision to changes in the discount rate.

Net Present Value (NPV) Is Usefully Supplemented by Internal Rate