Internal Rate of Return (IRR) Quiz Questions and Answers
1. What does Internal Rate of Return (IRR) represent in a project?
a) The initial investment
b) The discount rate that makes the net present value zero
c) The total revenue generated
d) The total expenses incurred
Answer: b) The discount rate that makes the net present value zero
Explanation: The Internal Rate of Return (IRR) is the discount rate at which the present value of cash inflows equals the present value of cash outflows, resulting in a net present value of zero. It represents the rate of return that makes an investment or project economically viable.