D) The rate at which the present value of the initial investment equals zero is known as the internal rate of return. The internal rate of return is the rate at which the project's net present value equals zero, not its present value.
Capital budgeting frequently makes use of the internal rate of return (IRR), which is the interest rate at which the net present value of all cash flows is zero. The IRR selects an investment with a higher rate of return, which may not always be advantageous to the company's shareholders.
The expected annual rate of growth for an investment is referred to as the internal rate of return (IRR). The net present value (NPV) is set to zero when IRR is calculated, but the concept is the same.
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