The discount rate that equates the present value of a project’s cash inflows with the present...

The discount rate that equates the present value of a project’s cash inflows with the present value of the project’s outflows is:

Expert Solution

The discount rate that equates the present value of a project's cash inflows with the present value of the project's outflows is known as the Internal Rate of Return (IRR). Internal Rate of Return is known as the discount rate that derives the net present value of zero. Zero NPV refers to the cash proceeds of the project that is precisely identical to the cash proceeds from the substitute investment at an articulated rate of return. The finance invested in the project earns at a rate of interest is collectively known as the Internal Rate of Return (IRR).

All the things considered equal, the higher the Internal Rate of Return (IRR), the more profitable will be the investment. In simpler words, if the internal rate of return is more than the expected rate of interest then the project is acceptable. On the contrary, if the internal rate of return is less than the expected rate of return, then the project is not admissible.

ekkarill92 answered 2 years ago

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