Question

The internal rate of return for an investment project is best defined as the:A) discount rate that causes the net present value to equal zero.B) difference between the market rate of interest and the discount rate.C) market rate of interest less the risk-free rate.D) minimum project acceptance rate set by management.E) maximum rate that can be earned for a project to be accepted.

Answer 1

Answer: A) discount rate that causes the net present value to equal zero.

Explanation:

Internal rate of return (IRR) this is usually the interest rate at which the net present value of all the cash flows ( which comprises of both positive and negative) from a project, investment or business equal zero. Internal rate of return helps in analyzing and evaluating the attractiveness of a project or investment.