PRC-2 · Chapter 6 · Question 13 of 45
How is the Internal Rate of Return (IRR) mathematically defined within standard discounted cash flow analysis?
Test yourself: pick an answer
Reveal answer & explanation
Correct answer: A) The discount rate that equates the present value of expected cash inflows to the initial investment cost.
Explanation
The IRR is the exact 'break-even' discount rate where the PV of inflows perfectly matches the PV of outflows, resulting in a Net Present Value of exactly zero.
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