Question

The true economic yield produced by an asset is summarized by the asset's:____.

Answer 1

The true economic yield produced by an asset is summarized by the asset's internal rate of return.

What is  internal rate of return?

• In financial analysis, the internal rate of return (IRR) is a statistic used to calculate the profitability of possible investments. IRR is a discount rate that, in a discounted cash flow analysis, reduces all cash flows' net present values (NPV) to zero.
• The same formula is used for NPV calculations and IRR calculations. Remember that the project's true financial value is not represented by the IRR.
• The annual return is what brings the NPV to a negative value. The more attractive an investment is to make, the greater the internal rate of return.
• IRR can be used to rank numerous potential investments or projects on a pretty even basis because it is consistent for investments of different types.

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