CIMA BA2 · Chapter 12 · Question 12 of 13
What is the INTERNAL RATE OF RETURN of a project?
Test yourself: pick an answer
Reveal answer & explanation
Correct answer: B) The discount rate at which the project's net present value is zero
Explanation
The IRR is the discount rate that makes the present value of inflows equal to the present value of outflows, so NPV = 0. A project is acceptable if its IRR exceeds the cost of capital. Average profit divided by investment is the accounting rate of return.
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