Final answer:
The correct answer is D) internal rate of return. The internal rate of return (IRR) is the discount rate that equates the present value of the cash inflows with the initial investment.
Step-by-step explanation:
The correct answer is D) internal rate of return . The internal rate of return (IRR) is the discount rate that equates the present value of the cash inflows with the initial investment. It represents the rate of return at which the net present value (NPV) of an investment becomes zero.
To calculate the IRR, you need to estimate the future cash inflows and outflows, as well as the initial investment. Then, you can use trial and error or financial software to find the discount rate that makes the NPV equal to zero.
For example, if you have a project with an initial investment of $10,000 and expected cash inflows of $3,000 per year for 5 years, you can calculate the IRR using a financial calculator or software to find the rate that makes the NPV of these cash flows equal to $0.