A project has the following projected cash flows:
Year 0: -$100,000 (initial investment)
Year 1: +$30,000
Year 2: +$40,000
Year 3: +$50,000
Which of the following statements about Internal Rate of Return (IRR) is true?

Question

A project has the following projected cash flows:

Which of the following statements about Internal Rate of Return (IRR) is true?

Accepted Answer

IRR is the discount rate that makes NPV zero, and it can be found using Excel or interpolation.

Answer

IRR is equal to the discount rate at which NPV equals the total benefits.

Answer

The IRR will always exist and be unique for this cash flow.

Answer

IRR can be directly compared between projects and added together to make portfolio decisions.

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