Without using formulas, provide a definition of internal rate of return (IRR).

Multiple Choice

• A graphical representation of the relationship between varying rates of return and the corresponding NPV value.
• A project analysis tool that measures the acceptability of a project by determining the amount of profit that can be expected based on an investment made.
• A situation whereby a choice has to be made between two or more projects, and choosing multiple projects is not an option.
• The rate of return provided by a project. The value is compared with a company's rate of return to determine viability of a project.
• A project analysis tool that measures the acceptability of a project through the difference between a project's initial investment and whether the present value of its cash flow will repay the investment.