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Internal Rate of Return Method: Definition & Calculation

Instructions:

Choose an answer and hit 'next'. You will receive your score and answers at the end.

question 1 of 3

Financial managers make major decisions concerning _____.

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1. Net present value, or NPV, is calculated using the _____ of the investment and the investment's market value in the future.

2. The internal rate of return method is only one of several different approaches to help managers determine which long-term _____ should be considered.

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About This Quiz & Worksheet

These assessment questions will ask you about computations and the IRR method. See how you do when asked about calculating present value and when to accept a specific IRR value.

Quiz & Worksheet Goals

The quiz will ask about your understanding of:

  • Investment and returns
  • What it is that financial managers make decisions on
  • How net present value is calculated
  • Internal rate of return as a tool used by managers

Skills Practiced

  • Interpreting information - verify that you can review information regarding IRR versus required rate of return and interpret it correctly
  • Information recall - access the knowledge you've gained regarding what financial managers make decisions on
  • Knowledge application - use your knowledge to identify proper calculation of net present value
  • Critical thinking- explore how the IRR, when used as the discount rate, impacts NPV

Additional Learning

More information about this topic can be found in the lesson titled Internal Rate of Return Method: Definition & Calculation. See what the lesson has to say about:

  • Examples of NPV
  • Finding IRR from an investment with multiple cash flows
  • Whose responsibility it is to determine if a specific investment will increase the stock price
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