Answer (C) is correct . The IRR is the interest rate at which the present value of the expected future cash inflows is equal to the present value of the cash outflows for a project. Thus, the IRR is the interest rate that will produce a net present value (NPV) equal to zero. The IRR method assumes that the cash flows will be reinvested at the internal rate of return.
Answer (A) is incorrect because The hurdle rate is a concept used to calculate the NPV of a project; it is determined by management prior to the analysis.
Answer (B) is incorrect because The IRR is the rate of interest at which the NPV is zero.
Answer (D) is incorrect because The IRR is a means of evaluating potential investment projects.
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