Economics · Financial Management

Which of the following statements regarding the Internal Rate of Return (IRR) is correct?

Verified Solution4 OptionsUpdated: October 2026👁️1 View

1A project should be accepted if its IRR is lower than the target Return on Capital Employed (ROCE).
2IRR ignores the time value of money and focuses only on total accounting profits.
3IRR is the discount rate at which the Net Present Value (NPV) of a project is zero.✓
4If the IRR is lower than the company's cost of capital, the Net Present Value (NPV) will be positive.

Correct answer

IRR is the discount rate at which the Net Present Value (NPV) of a project is zero.

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