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The internal rate of return of a project is the discount rate at which its

  • A.annual saving equals the investment
  • B.net present value is zero
  • C.payback period equals its life
  • D.benefit-cost ratio is zero

Answer: B

It expresses the project's earning power as a percentage, which management often finds easier to compare against a borrowing cost than a present value in rupees. It is found by iteration or by interpolation between two trial rates.

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