The internal rate of return is best described as that discount rate that _______
The internal rate of return is best described as that discount rate that _______
A equates the NPV and IRR
B makes NPV equal zero
C. equals the required rate of return
D. equates all cash flows to the current market rate
Homework Answers
The correct answer is B.
Internal rate of return (IRR) is the discount rate which makes the present value of cash inflows equal to the present value of the cash outflows.
NPV is the difference between the present value of the expected cash inflows and the present value of the expected cash outflows. Since both the values are equal at IRR, hence IRR can be described as that discount rate which makes NPV equal zero.
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The internal rate of return is best described as that discount rate that _______
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