Asked by Fatihah Masri on May 12, 2024
Verified
When the net present value method is used, the internal rate of return is the discount rate used to compute the net present value of a project.
Net Present Value Method
A financial analysis tool used to evaluate the profitability of an investment, taking into account the time value of money.
Discount Rate
This interest rate is used in the framework of discounted cash flow analysis to determine the present worth of cash flows anticipated in times ahead.
- Acquire the skill to compute the net present value (NPV) of an investment and comprehend its significance in the context of making investment decisions.
Verified Answer
RP
Rabindra PatraMay 15, 2024
Final Answer :
False
Explanation :
The internal rate of return (IRR) is the discount rate that makes the net present value (NPV) of all cash flows from a particular project equal to zero. It is not the discount rate used to compute the NPV; rather, it is a rate derived from calculating NPV to be zero.
Learning Objectives
- Acquire the skill to compute the net present value (NPV) of an investment and comprehend its significance in the context of making investment decisions.
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