In internal rate of returns, discount rate which forces net present values to become zero is classified as__________?
Correct answer: D. Internal rate of return
- A. Positive rate of return
- B. Negative rate of return
- C. External rate of return
- D. Internal rate of return
Explanation
The internal rate of return is the discount rate that makes a project’s net present value exactly zero. It is called internal because it is determined by the project’s own cash flows rather than an external rate.
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About Business Finance
Business finance explains how organisations plan, obtain and use money while balancing risk, return and liquidity. Topics include financial statements, time value of money, budgeting, working capital, capital structure, sources of finance, investment appraisal and cost of capital. Capital budgeting evaluates long-term projects, whereas working capital manages day-to-day operations.
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