Financial Planner

Category - General Principles of Financial Planning

What concept places a discount rate that gives a project a net present value that is equal to zero?
  1. Internal Rate of Return
  2. Serial Payments
  3. Net Present Value
  4. Uneven Cash Flows
Explanation
Answer: A - Internal rate of return places a discount rate that gives a project a net present value that is equal to zero. The IRR is used to evaluate, rank, and select from various investment projects. The internal rate of return is the average annual return earned through the life of an investment. If the internal rate of return is higher than the desired rate of return on an investment, then the project is a desirable one.
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