Question

Which of the following defines internal rate of return (IRR)? a.IRR is the total variable cost incurred in a project. b.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. c.IRR is the maximum return achievable on investments. d.IRR is the difference between the present value of the cash inflows and outflows associated with a project.

Answer 1

Answer:

b.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.

Explanation:

The internal rate of return is the discount rate that equates the after tax cash flows from an investment to the amount invested.

The net present value is the present value of after tax cash flows from an investment less the amount invested.

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