Question

How is the Internal Rate of Return (IRR) on a project defined?

a.

The return that equals the present value of the discounted net cash flows on the project to exactly zero

b.

The highest rate of return a project can achieve

c.

The return that guarantees the highest NPV

d.

The return that equals the cost of capital

Answer: (a).The return that equals the present value of the discounted net cash flows on the project to exactly zero Explanation:The Internal Rate of Return (IRR) on a project is defined as the return that equates the present value of the discounted net cash flows on the project to exactly zero.

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Q. How is the Internal Rate of Return (IRR) on a project defined?

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