Question

The rate at which present value of cash inflows becomes equal to present value of cash outflows is called in quiz

Answer 1

The rate at which cash inflows is equal to the cash outflows is called as the Internal Rate of Return.

The Internal Rate of Return method is a discounted rate used for analysing the profitability of a project.

It is the rate at which the current value of returns from a project minus the costs involved is zero.

Answer 2

The rate at which present value of cash inflows becomes equal to present value of cash outflows is called Internal Rate of Return

Explanation:

• Internal rate of return is nothing but the rate at which the cash in a company flows inwards and the amount of cash outflows from the company remain the same.
• The internal rate of return is used to check the returns of the performance and is usually calculated using the net present value.
• The NPV is set as zero and the rate of the growth of a certain task/ project is IRR.
• IRR is used to decide on which project to undergo and which will give the best result according to current performance (capital budgeting)

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