Answer (D) is correct . The internal rate of return (IRR) is the discount rate at which the present value of the cash flows equals the original investment. Thus, the NPV of the project is zero at the IRR. The IRR is also the maximum borrowing cost the firm could afford to pay for a specific project. The IRR is similar to the yield rate/effective rate quoted in the business media.
Answer (A) is incorrect because The IRR is the discount rate at which the NPV of the cash flows is zero, the breakeven borrowing rate for the project in question, the yield rate/effective rate of interest quoted on long-term debt and other instruments, and favorable when it exceeds the hurdle rate.
Answer (B) is incorrect because The IRR is the discount rate at which the NPV of the cash flows is zero, the breakeven borrowing rate for the project in question, the yield rate/effective rate of interest quoted on long-term debt and other instruments, and favorable when it exceeds the hurdle rate.
Answer (C) is incorrect because The IRR is the discount rate at which the NPV of the cash flows is zero, the breakeven borrowing rate for the project in question, the yield rate/effective rate of interest quoted on long-term debt and other instruments, and favorable when it exceeds the hurdle rate.
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