In internal rate of returns, the discount rate which forces the 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 the present value of expected cash inflows equal to the initial investment, producing an NPV of zero. It is called internal because it is derived from the project's own cash flows.
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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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