Multiple Select QuestionSelect all that applyWhich of the following are correct statements about the internal rate of return (IRR)? (Check all that apply.)Multiple select question.IRR is expressed in dollars.IRR uses the time value of money.The higher the IRR, the better.IRR uses accrual income as the measurement basis.
Question
Multiple Select QuestionSelect all that applyWhich of the following are correct statements about the internal rate of return (IRR)? (Check all that apply.)Multiple select question.IRR is expressed in dollars.IRR uses the time value of money.The higher the IRR, the better.IRR uses accrual income as the measurement basis.
Solution
The correct statements about the internal rate of return (IRR) are:
- IRR uses the time value of money.
- The higher the IRR, the better.
The other two statements are incorrect. IRR is not expressed in dollars, but as a percentage. Also, IRR does not use accrual income as the measurement basis, but rather it is a discount rate that makes the net present value (NPV) of all cash flows (both positive and negative) from a particular project equal to zero.
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