Question

The rate that yields a net present value of zero for an investment is the: Multiple Choice Internal rate of return. Accounting rate of return. Net present value rate of return. Zero rate of return. Payback rate of return.

Answer 1

Answer: Internal rate of return

Step-by-step explanation:

The Internal Rate of Return is a financial analysis measure that yields a net present value of zero for an investment. In so doing it can be used to determine the financial viability of a project.

It does this by telling the company which required rate of return will return a positive NPV because the logic is that if the Required Rate of Return for the project is lower than the IRR, it will yield an NPV greater than 0 which is what the IRR was able to yield because it would discount the cashflows less.