The Internal Rate of Return (IRR)is

question 69

Multiple Choice

The internal rate of return (IRR) is:

• A)the discount rate that makes the NPV greater than zero for a given set of cash flows.
• B)the discount rate that sets the FV of future CFs equal to the initial cash outlay.
• C)the opportunity cost of the capital invested in the project.
• D)the economic rate of return of a given project.

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Definitions:

Expected Return

The projected average return on an investment, accounting for all potential outcomes and their probabilities.

Expected Market Return

The average return anticipated from an investment in a broad market index over a certain period.

Expected Return

The anticipated return on an investment based on the probabilities of possible outcomes.

Risk-Free Rate

The expected earnings from an investment that carries no risk of losing money, typically exemplified by the return on government bonds.