Question

If the net present value of a project is zero based on a discount rate of 16%, then the internal rate of return is:_______a. less than 16%. b. equal to 16%. c. greater than 16%. d. cannot be determined from this data

Answer 1

Answer:

b. equal to 16%.

Explanation:

The Internal rate of return is the interest rate that will make the present vale of the cash flows equal to the price or initial cost of the investment.

In simple words, this is the rate that give a net present value of zero.

The discount rate of 16% has produced a net present value of zero, then that is the Internal rate of return as well.