Question

Which one of the following defines the internal rate of return for a project? a) Discount rate that creates a zero cash flow from assets b) Discount rate which results in a zero net present value for the project c) Discount rate which results in a net present value equal to the project's initial cost d) Rate of return required by the project's investors e) The project's current market rate of return.

Answer 1

Answer:

a) Discount rate that creates a zero cash flow from assets

Explanation:

The internal rate of return (IRR) is a metric used in capital budgeting to estimate the profitability of potential investments. The internal rate of return is a discount rate that makes the net present value (NPV) of all cash flows from a particular project equal to zero.