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    Question

    IRR is a rate at

    which
    A PV of cash inflow/PV of cash outflow = 1 Correct Answer Incorrect Answer
    B PV of cash inflow/PV of cash outflow > 1 Correct Answer Incorrect Answer
    C PV of cash inflow/PV of cash outflow < 1 Correct Answer Incorrect Answer
    D PV of cash inflow/PV of cash outflow = 0 Correct Answer Incorrect Answer
    E None of these Correct Answer Incorrect Answer

    Solution

    IRR or the internal rate of return is the rate at which present value of Cash Inflows = present Value of Cash Outflows. OR this can also be written as PV of Inflows/PV of outflows = 1 or NPV (i.e. PV of inflows-PV of outflows) = 0

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